26th Oct 2022 16:22
(Alliance News) - Reckitt Benckiser Group PLC reported strong revenue growth in the third quarter of 2022 on Wednesday, but a decline in volumes has led analysts to wonder how hard the cost-of-living crisis will hit the consumer goods firm.
In the third quarter, Reckitt said total revenue grew 14% year-on-year to GBP3.74 billion, or 7.4% on a like-for-like basis.
Like-for-like growth benefitted from foreign exchange tailwinds of 8.5%, partially offset by net mergers & acquisitions impact of 1.9%.
Meanwhile, price and mix improvements of 12% helped to offset a volume decline of 4.6%.
For Laith Khalad, head of investment analysis at AJ Bell, this "slowing quarterly sales growth" and "absolute decline in the volume of goods sold" highlighted how the big pressures on household budgets are having an impact.
"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," Khalad added.
Reckitt Benckiser brands include antiseptic Dettol, sore throat medicine Strepsils, air freshener Air Wick, amongst other big names like Nurofen and Durex.
For Victoria Scholar, head of investment at interactive investor, the firm's "biggest risk" would be if consumers started to trade down from these branded ranges towards the cheaper, unbranded alternatives.
"So long as it continues to invest in advertising and marketing and raise prices where necessary, then overall revenue should hold up, despite falling demand," Scholar argued.
"As a seller of essential items, Reckitt has strong pricing power that makes it relatively resilient to deal with the cost-of-living crisis that is squeezing household incomes," she continued.
Despite the challenging environment, Reckitt reiterated its annual targets. However, for like-for-like revenue growth, it tweaked the range upwards to between 6% and 8%, compared to 5% and 8% previously.
Following the like-for-like revenue growth downgrade on Wednesday, the consumer goods firm has languished at the bottom of the FTSE 100.
The stock was down 4.0% at 5,730.00 pence on Wednesday afternoon. In the year-to-date, Reckitt has fallen 9.7%.
By Heather Rydings; [email protected]
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