Consumer goods giant Reckitt Benckiser saw its share slump this week as its 2023 sales underperformed City expectations following an “unsatisfactory” fourth quarter.
The Dettol and Durex maker posted a like-for-like sales decline of 1.2% in its final quarter of the year. A difficult cold and flu season affected the group’s health division in the final three months of the year, with like-for-like sales falling 2%, while the nutrition arm plunged 14.8% as challenges in North America continued to hurt trading.
Reckitt said it also identified an understatement of trade spend in two Middle Eastern markets related to the fourth quarter and prior quarters of 2023, meaning full-year net revenue performance was £55m lower than previously expected. Following an investigation, the group concluded a small group of employees had acted “inappropriately”, with disciplinary action being taken by the company.
Revenues for 2023 topped £14.6bn, reflecting adjusted like-for-like net growth of 3.5%. The group reported net revenue growth of 1.1% as like-for-like sales growth was offset by currency headwinds and a negative M&A impact.
For the full year, its hygiene division grew organic revenues by 5.1% thanks to an average rise in prices of 11.1%, with volumes tumbling 6%.
However, adjusted operating profits for the year fell 1.9% to £3.4bn as margins fell back on a reported basis. Reckitt said adjusted margins marginally expanded when accounting for US Nutrition competitor impacts last year.
Reckitt predicted like-for-like net revenue growth of 2%-4% for the group in 2024 and adjusted operating profit to grow ahead of sales.
But Bernstein analyst Bruno Monteyne said Reckitt disappointed across the board. “We can’t help but see steady volume declines in hygiene and nutrition. That grates with Reckitt’s repeated mantra of being a sustainably mid-single-digit organic growth company.”
Russ Mould, investment director at AJ Bell, added: ““So much for the idea that big brand owners are bulletproof during periods of higher inflation. It’s clear from industry trends that cash-strapped consumers have shifted to cheaper alternatives including supermarket own-brand items… For a company that was once seen as an industry leader, Reckitt has been a big disappointment in recent years and the latest results keep that theme going.”
Reckitt shares slumped 13.3% on Wednesday back to 5,062p and were down another 2.1% by Thursday lunchtime to 4,958.4p.
That represents the first time Reckitt shares have dropped below 5,000p since 2014, and they are now 15.3% down year on year.
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