Reckitt Benckiser Fails to Grow for First Time Since 1999

  • Scholl, home-care weakness in U.S. hold back sales growth
  • CEO Kapoor says performance to accelerate in second half

Reckitt Benckiser Group Plc failed to deliver quarterly sales growth for the first time in the company’s history as setbacks in its Scholl foot-care and Air Wick freshener brands weighed on results.

The Slough, England-based maker of Durex condoms and Dettol cleaners reported flat like-for-like sales for the first quarter and warned that headwinds would persist through the first half of the year as some new products fail to entice shoppers. The shares fell as much as 2.2 percent in London.

“Perhaps we should have spaced out these launches to give them enough breathing time and recovery time,” Chief Executive Officer Rakesh Kapoor said on a conference call with analysts, referring to disappointing sales figures for new products such as Scholl’s Wet and Dry Velvet Smooth electric hard-skin remover.

The results contrasted with generally upbeat news from rivals Unilever and Nestle SA, which on Thursday reported better-than-expected sales after raising prices. Dairy giant Danone upgraded its profit growth forecast.

Reckitt Benckiser’s performance should accelerate after the second quarter, Kapoor said. Other releases from the foot-care unit, such as compressed hosiery and insoles, have been well-received, he said.

For a Bloomberg Intelligence review of RB’s first quarter, click here.

While the company maintained its full-year outlook for growth of 3 percent in like-for-like sales, its flat result in the quarter marks the worst performance since the company was formed through a 1999 merger, Sanford C. Berstein analyst Andrew Wood wrote in a note to investors. Like-for-like sales exclude acquisitions, disposals and currency shifts.

Reckitt Benckiser’s home-care division posted its steepest-ever quarterly decline as Air Wick performed poorly in the U.S. Excluding Scholl, sales in the health unit, which includes brands such as Nurofen painkillers and Strepsils lozenges, are outperforming the industry’s long-term growth rate of between 4 percent and 6 percent, Kapoor said.

“Given that RB missed its full-year sales guidance in 2016, its credibility with investors is lower than in the past, but we do expect a recovery and the first quarter should be the nadir,” Bernstein’s Wood wrote.

  • Total revenue in the quarter matched estimates at 2.64 billion pounds ($3.4 billion) due to a benefit from exchange rates.
  • Reckitt Benckiser said it’s on track to close its $16.6 billion takeover of Mead Johnson Nutrition Co. in the third quarter.
  • New products such as Air Wick Freshmatic and Vanish Platinum are showing early promise, Kapoor said.
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