- Third quarter like-for-like sales grew 7.4%
- Warns of ‘tougher inflationary environment’
- Nutrition margins to normalise
Price hikes helped consumer goods goliath Reckitt Benckiser (RKT) to deliver better than expected third quarter revenues and the Nurofen, Strepsils and Air Wick maker now sees full year sales coming in at the upper end of earlier guidance.
Unfortunately, investors’ attentions were focused on the fact third quarter sales growth marked a slowdown compared to the first half, while the FTSE 100 company also warned it will invest more heavily and face a ‘tougher inflationary environment’ in the coming months.
HOW DID RECKITT BENCKISER BEAT SALES FORECASTS?
Reckitt Benckiser’s third quarter like-for-like revenue grew 7.4%, ahead of the 6.1% growth analysts were looking for, though the pace of growth slowed compared to the 11.9% growth seen in the second quarter and the 8.6% growth generated in the first half.
The company benefited from a surge in nutrition and health products and price increases which offset a 4.6% volume decline, largely driven by volume falls in Lysol as the pandemic winner lapped tough comparatives.
Following a strong year-to-date performance, Reckitt Benckiser said it is ‘narrowing the range’ of its 2022 like-for-like sales growth target from a 5% to 8% range to 6%-to-8% and continues to expect growth in adjusted operating margins.
This is despite cost of goods sold (COGS) inflation set to remain ‘in the high teens’ for the full year.
‘Slowing quarterly sales growth at consumer goods outfit Reckitt Benckiser, and an absolute decline in the volume of goods sold, highlighted how the big pressures on household budgets are having an impact,’ commented AJ Bell head of investment analysis Laith Khalaf.
‘The company also offered little comfort for shoppers facing higher prices on the shelves as it pledged to continue passing on higher costs. From Reckitt’s perspective this at least demonstrates that its brands retain some pricing power.’
WHAT DID THE CEO SAY?
CEO Nicandro Durante, the former British American Tobacco (BATS) boss temporarily occupying the hot seat following the shock resignation of Laxman Narasimhan, insisted Reckitt had delivered another quarter of ‘broad-based growth amidst challenging market conditions, as we continue to innovate and improve on our in-market execution.’
Durante added: ‘We have an excellent portfolio of trusted, market-leading brands in high margin, high growth categories and a strong culture of ownership and delivery. My priority is firmly focussed on continuing to execute on our strategic path, to deliver sustainable mid-single digit growth, and mid-20s adjusted operating margins by the mid-2020s.’
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (James Crux) owns shares in AJ Bell.
