Reckitt Benckiser Adds to Consumer-Sector Gloom With Weak Sales

  • Shares decline as much as 3.7% in London trading on miss
  • Sales advanced at the slowest pace in more than five years

Reckitt Benckiser Group Plc said revenue growth this year will be at the bottom of its forecasted range after sales advanced at the slowest pace in more than five years, marking the latest set of lackluster results from the consumer-goods sector.

Third-quarter sales rose 2 percent, the worst result since the second quarter of 2011, the company said Wednesday. Demand for Reckitt Benckiser’s brands, which include Nurofen painkillers and Durex condoms, ebbed in Russia and suffered after deaths in South Korea were linked to disinfectant products it used to sell. Revenue growth this year will be 4 percent, the bottom end of its previous forecast. The shares fell as much as 3.7 percent.

The results show how conditions have worsened for consumer-product makers, who are grappling with deflation in Europe that’s crimped their ability to raise prices while inflation rages in some emerging markets like Brazil. Both Unilever and Danone posted a drop in product shipments last quarter, and analysts expect Nestle’s nine-month sales growth to decelerate from last year’s pace when it reports results Thursday.

“It’s tough out there for the consumer goods sector and there’s no sign of any corner turned,” Martin Deboo, an analyst at Jefferies, said by phone. “Reckitt Benckiser’s relying on the innovation pipeline to bring the performance back but it’ll be a white-knuckled ride through the fourth quarter.”

Accelerating growth in the fourth quarter will not be “a walk in the park,” Reckitt Benckiser Chief Executive Officer Rakesh Kapoor said on a call with analysts. The company is grappling with plummeting sales in South Korea after the deaths of over 100 people were linked to toxic humidifier sanitizers it once sold. The tragedy led to boycotts and reduced third-quarter sales by 1.5 percentage points.

For a Gadfly commentary on Reckitt Benckiser, click here

Sales at the health business, once the company’s fastest-growing division, grew just 2 percent as demand for Scholl’s Wet and Dry Velvet Smooth electric hard-skin remover didn’t meet the company’s expectations. Analysts had expected growth of 5.3 percent in the quarter, and in recent quarters the unit has grown more than 10 percent.

  • Homecare unit sales declined 2 percent, hygiene unit revenue rose 5 percent
  • Revenue in Europe/North America region was unchanged compared with 6 percent growth in same period last year
  • Wider legal or governmental investigation in South Korea could prompt further liability, the company said
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