Reckitt Benckiser has cut its annual sales guidance to between 3.5% and 4.5% like-for-like growth, down from its previous forecast of 4% to 5%, as the London-listed household goods group grapples with rising costs stemming from the Iran war. The company, which owns brands including Gaviscon and Vanish, blamed the downgrade on slumping sales in North America, where manufacturing problems affecting its cleaning product Lysol disrupted output.
To offset inflation caused by the Middle East conflict, Reckitt took what it described as selective pricing actions across Europe, with prices rising by 4% in the three months to September 30. These increases helped the firm return to sales growth in its Europe, Australia and New Zealand division despite challenging consumer conditions. The division recorded a 0.8% rise in like-for-like sales in the third quarter, though volumes fell by 3.2% as shoppers sought out discount alternatives.
Reckitt said consumer confidence in the region remained subdued, with elevated promotional activity and value-seeking behaviour driving market share gains for discount retailers, particularly in the germ protection category. North America presented a steeper challenge, with sales dropping 1.3% in the third quarter. The company said it expects both Lysol and the wider North American business to recover in the final three months of the year once temporary manufacturing issues are resolved.
Overall like-for-like sales for the core business lifted 3.3% during the quarter. Kris Licht, chief executive, said: "North America was below our expectations. While consumer demand for Lysol remains strong, temporary manufacturing constraints limited our ability to fully meet demand." Shares in the FTSE 100 firm slumped 6% in morning trading on Tuesday following the announcement.
Chris Beauchamp, chief market analyst at IG, suggested the market reaction may be overdone. He said: "Investors shouldn't let the US miss sour them too much on the prospects for Reckitt. Growth looks much more broad-based, and with North American trading expected to recover in the fourth quarter, there are still reasons to be optimistic."