25th Oct 2023 12:52
(Alliance News) - A GBP1 billion share buyback was not enough to blind Reckitt Benckiser Group PLC shareholders to Chief Executive Kris Licht's "uncertain start" on Wednesday, AJ Bell's Danni Hewson said, as the firm's like-for-like growth came slightly below expectations.
Shares in the consumer goods firm fell 5.0% to 5,622.00 pence in London on Wednesday afternoon.
In the third quarter of 2023, Reckitt said like-for-like sales ticked up 3.4% to GBP2.60 billion. This was driven by 8.1% and 5.4% growth in its Hygiene and Health arms, respectively, but offset by a 12% fall in its Nutrition division.
Meanwhile, on a total basis, sales fell 3.6%.
Danni Hewson, head of financial analyst at AJ Bell, said the like-for-like figures came in "slightly below" expectations as Reckitt's Nutrition business reported a "rough quarter."
Hewson explained that Nutrition suffered in comparison with the same quarter of last year, when a US competitor faced temporary supply issues with its infant formula, driving volumes in Reckitt's direction.
However, she also noted that Reckitt recorded "a pretty significant drop in volumes across the board" during the third quarter this year, leading to concern that this may reflect a shift in consumer behaviour.
"While for drinks, snacks and other food items people might be willing to push the boat out and still buy their favourite brands – can the same hold true for cleaning products and over-the-counter medicine? If not, then Reckitt risks losing any reputation for pricing power," Hewson warned.
"[CEO Kris] 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."
Reckitt said on Wednesday that it will continue to target group like-for-like net revenue growth of 3% to 5% in 2023, and continues to expect adjusted operating margins to be slightly above 2022 levels of around 24%.
Commenting on the results, Licht said: "We do, however, have room to sharpen and improve. We will continue to invest in the superiority of our products, work to improve the consistency of our in-market execution and optimise our cost base. At the same time, we will constantly sharpen our portfolio in line with our clear principles for portfolio value creation."
By Heather Rydings, Alliance News senior economics reporter
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