Reckitt Benckiser Sales Miss Estimates As Korea, Russia Slow
Reckitt Benckiser Group Plc narrowed its revenue growth outlook to the bottom of its previous forecast after sales missed estimates for the second straight quarter as demand ebbed in Russia and results suffered after deaths in South Korea were linked to its products.
Sales rose 2 percent, excluding acquisitions, disposals and currency shifts, the Slough, England-based maker of Durex condoms said in a statement Wednesday. The median estimate of analysts surveyed by Bloomberg was for a 2.5 percent gain. The company said it sees full-year sales growth of 4 percent, the low end of its previous forecast. The shares fell as much as 3.7 percent in early trading in London.
“Our third quarter performance has been adversely impacted by the flagged issues in Korea, Russia and our Scholl innovation,” the company said in the statement, referring to a disappointing consumer reaction to new footcare products under its Scholl brand. The outlook for Russia “remains uncertain.”
Reckitt Benckiser is the latest consumer-product company whose results have disappointed analysts, following Danone Tuesday and Unilever last week. Chief Executive Officer Rakesh Kapoor is grappling with plummeting sales in South Korea after the deaths of over 100 people were linked to toxic humidifier sanitizers it once sold. Kapoor has apologized for the tragedy, which led to boycotts and reduced third-quarter sales by 1.5 percentage points. It’s possible a wider legal or governmental investigation could prompt further liability, the company said.
The setback in South Korea contributed to a 2 percent decline in its homecare business. The health business, once the company’s fastest-growing division, grew 2 percent as sales of new Scholl products including the Wet and Dry Velvet Smooth rechargeable electric hard-skin remover failed to entice shoppers in Europe and North America. Analysts had expected growth of 5.3 percent in the quarter.
“The main surprise relative to our expectations is health, where growth has now slowed,” Jeff Stent, an analyst at Exane BNP Paribas, said in a note.
Higher costs for suppliers, retailers and consumers of RB’s Strepsils lozenges and French’s mustard may be in store as the pound plumbs new depths after Britons voted to leave the European Union. Last week, rival Unilever became embroiled in a dispute with U.K. retailer Tesco Plc as it reportedly sought to increase the price of its products by 10 percent, prompting Tesco to pull Unilever’s products from its online store.
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