Reckitt, the maker of Dettol and Lysol cleaning products, missed third-quarter like-for-like sales expectations, despite raising product prices to help offset rising raw material costs.
The company also said it would start a £1 billion (€1.15 billion) share buyback programme 'imminently', which is set to take place over the next 12 months.
'Reckitt delivered a strong quarter with 6.7% LFL growth across our Hygiene and Health businesses and has maintained market leadership in our US nutrition business,' the group said in a statement.
'Firmly On Track'
The company is "firmly on track to deliver our full-year targets, despite some tough prior year comparatives that we continue to face in our U.S. nutrition business and across our OTC (over the counter) portfolio in the fourth quarter," commented chief executive Kris Licht.
Licht took the helm at the company at the start of October.
Like-For-Like Sales
Reckitt said quarterly like-for-like net sales rose 3.4%, behind the 3.7% growth analysts had expected in a company-supplied poll.
The price/mix for Reckitt's products, which include Nurofen tablets and Durex condoms, rose 7.5%. Volumes declined 4.1% compared with last year, when the recall of a rival U.S.-based company's infant formula boosted sales of Reckitt's Enfamil products in that country.
Volumes otherwise declined 1.6% in Reckitt's hygiene and health businesses combined as shoppers balked at higher product prices.
Reckitt is committed to achieving a 3% to 5% year-on-year growth in like-for-like net revenue in 2023, even after factoring in the comparison to the impact of the US Nutrition business in 2022. Furthermore, the company anticipates that its adjusted operating margins for 2023 will remain slightly higher than those of 2022.
Analyst Viewpoint
Commenting on the group's performance, analyst Danni Hewson of AJ Bell said, “News of a £1 billion share buyback is not enough to blind shareholders to an uncertain start for new Reckitt boss Kris Licht with like-for-like sales growth coming in slightly below expectations and its Nutrition business having a rough quarter.
“To be fair Nutrition is suffering in comparison with the same period of last year when a US competitor faced temporary supply issues with its infant formula, but the specialist in health and hygiene branded goods saw a pretty significant drop in volumes across the board, compensated for by rising prices.
“There may be concern in the market that this reflects a shift in consumer behaviour with people switching out of the likes of Nurofen and Finish dishwasher tablets into own-brand alternatives.
“Licht has a job on his hands to demonstrate Reckitt can continue to thrive in a tough consumer environment. Having stuck with full-year targets, he will be under significant pressure to achieve them when he unveils the 2023 results next year.”
Additional reporting by ESM
