Reckitt Lowers Full-Year Outlook
October 19 2016 - 5:40AM
Dow Jones News
LONDON—Reckitt Benckiser Group PLC lowered its outlook for the
year and reported third-quarter sales that missed estimates on a
sharp slowdown in growth in the consumer-goods company's health
business.
Shares in the maker of Durex condoms and Strepsils cough drops
fell 2.1% in early trading in London.
Reckitt said like-for-like sales for the three months ended
Sept. 30 rose by 2% compared with the same period last year,
missing the 2.8% expected by analysts and marking the lowest growth
during Chief Executive Rakesh Kapoor's tenure.
The company is now targeting full-year like-for-like sales
growth of 4%, the second time it has guided estimates slightly
lower in three months. In July, Reckitt said it expected growth to
come in toward the lower end of the 4% to 5% target it gave in
February.
Under Mr. Kapoor—who became CEO in 2011—the Slough-headquartered
company has sharpened its focus on higher-margin consumer health
and made a string of acquisitions aimed at beefing up the
business.
The consumer-health unit's growth has slowed in recent quarters,
coming in at just 2% in the third quarter compared with 14% a year
earlier. Reckitt said part of that decline stemmed from
disappointing sales of a new model of a foot file, used for buffing
away dry skin, developed at its Scholl footcare unit.
Reckitt's performance signals how European consumer-goods
companies have struggled to log robust sales growth in tough
macroeconomic conditions marked by currency swings and the rise of
local competitors.
Unilever PLC last week reported a 3.4% rise in underlying
third-quarter revenue that was driven entirely by price increases
with no volume growth in a report from the Anglo-Dutch company that
analysts largely perceived as being weak.
French yogurt and bottled-water company Danone on Tuesday
reported third-quarter revenue that missed estimates as regulatory
changes in China slowed sales of baby food.
Wednesday, Reckitt highlighted a particularly tough environment
in Russia where it said "a significant decline in consumer demand"
had dragged on growth, adding that the outlook there remains
uncertain. The company flagged strong growth in India and China,
but cautioned that Brazil remains a tough market.
For the third quarter, same-store sales in hygiene—Reckitt's
largest division—rose 5% as brands like Dettol, Harpic and Finish
logged strong growth.
The home-products arm, which includes brands like Air Wick and
Vanish, reported that same-store sales declined 2%. The business,
which sells twice as much in developed markets than in emerging
markets has reported sluggish sales growth for years despite many
innovations.
Lately, the unit's sales have been knocked lower by a boycott of
Reckitt's products in South Korea after a humidifier disinfectant
was found in 2011 to be linked to the deaths of over 100 people
there.
Reckitt took years to publicly address the
humidifier-disinfectant deaths—only disclosing them to shareholders
this summer following a mounting backlash in South Korea—but has
recently apologized. The company has been working to regain its
footing there by offering compensation to victims.
Overall, Reckitt's problems in South Korea dragged down
like-for-like sales in the quarter by 1.5%.
RBC analyst James Edwardes Jones noted that for Reckitt to hit
its growth target for the year, the company will have to report
like-for-like growth of 4% in the fourth quarter, "which isn't
straightforward" given a tough comparison with a strong year-ago
period in increasingly tough trading conditions.
--Tapan Panchal contributed to this article
Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com
(END) Dow Jones Newswires
October 19, 2016 05:25 ET (09:25 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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