Headache for Nurofen owner Reckitt Benckiser as sales disappoint the City
Shares in the consumer goods giant slipped as its Scholl brand dragged down revenues.
Durex owner Reckitt Benckiser disappointed City analysts with its sales performance in the first quarter, sending its shares down 6% in morning trading on Friday.
Sales were up 2% on a like-for-like basis at the company, which owns a suite of household brands including Dettol, Clearasil and Gaviscon. Analysts had been expecting a rise of 2.6%.
Reckitt Benckiser bought nutrition specialist Mead Johnson last year, and said the integrated business had been performing well in China and had delivered growth of 6%.
However, the company was hit by “significant underperformance” from Scholl. The footcare brand brought down sales in Reckitt Benckiser’s health division, more than offsetting gains from Durex and VMS sales.
Reckitt Benckiser is expecting further weakness from Scholl in the short term, but is taking action to bring forward other projects to balance the business.
Despite missing targets, Reckitt Benckiser reassured investors that it was on track to grow its full-year revenues by between 2% and 3%.
The company did not explicitly refer to its recent decision to pull out of a bid for Pfizer’s health business, which followed on from Johnson & Johnson’s decision to walk away from the doomed auction.
However, Rakesh Kapoor, Reckitt Benckiser’s chief executive, said the company was not looking to grow through further acquisitions.
Mr Kapoor said: “Our priority remains organic growth under our new focused organisation structure. The integration of Mead Johnson is going well.
“We have work to do in parts of our health portfolio, particularly Scholl. I am very pleased to see such energy, focus and a strong start by the hygiene home team.”
Russ Mould, investment director at AJ Bell, said the company was “struggling to bounce back” after delivering its worst annual performance in 2017.
“In part this is due to pricing pressure, something which raises uncomfortable questions about the strength of the company’s brand portfolio,” he said.
“Having endured a damaging cyber attack and messed up a new product introduction last year, chief executive Rakesh Kapoor has made a great play of prioritising organic growth; little wonder then that the shares have been marked lower today.”