Dettol-to-Disprin maker Reckitt defies consumer spending slowdown
Reckitt said sales rose 1.5% in the first quarter, ahead of analysts’ expectations, after the company sold more products like Durex condoms and Dettol.
Reckitt Benckiser said consumers are back shopping for brands again as the maker of Dettol, Disprin and a host of other grocery items affirmed its outlook for the rest of the year.
Sales rose 1.5% in the first quarter, ahead of analysts’ expectations, after the company sold more products like Durex condoms and Dettol disinfectant. The group still expects full-year sales growth of between 2% and 4%, and adjusted operating profit to rise by more than that.
The shares rose 5%, but are still down by about a quarter since February.
The stronger-than-expected sales from Reckitt and Danone last week are tentative signs that shoppers are returning to branded products, after a period of high inflation pushed stretched consumers to supermarket own brands.
Reckitt is also reeling from a damaging court verdict related to some of its infant formula brands and a relatively weaker cold and flu season, as new chief executive Kris Licht attempts to prove to investors that he can deliver drama-free, consistent growth.
Sales at its nutrition unit fell almost 10% in the quarter as Reckitt’s US baby formula returns to more normal levels after a supply shortage caused by competitor Abbott’s voluntary recall spiked demand.
"Following a period of price-led growth, we are now returning to a more balanced contribution from price, mix and volume. We grew volumes in many of our powerbrands in the quarter, including Lysol, Dettol, Durex and Finish, as well as our non-seasonal OTC (over the counter) portfolio. In addition, we continue to benefit from carryover pricing and consumers trading up to our premium innovations," Mr Licht said.
“Reckitt is looking like a decent business,” Bernstein analyst Bruno Monteyne said in a research note. “Outside the US infant nutrition market, the company is doing well, and the US infant nutrition market share is holding up well," he said.
Mr Licht said the quarter’s performance was in line with the company’s expectations, and that Reckitt is returning to growth that’s not just fueled by inflation-linked price rises. Consumers are also starting to switch back to more expensive options, he said.
Shares in the London-listed company plunged 15% last month after a jury awarded an Illinois woman $60m (€56m) in damages, saying the company’s Enfamil formula led to the death of her baby. Reckitt denied it was the cause and said it will appeal. A trial in a related lawsuit is expected to begin on September 30 in Missouri.
On a call with analysts, Mr Licht said the legal action was not affecting nutrition sales and that the company is not going to stop selling the products in question because that could disadvantage premature babies.
