Consumer products group Reckitt Benckiser PLC (LON:RB.) saw its shares drop in early trading after it said its like-for-like sales were flat in the first quarter reflecting challenging market conditions as it progresses a strategic review of its food business and an expansion in to the US baby food industry.
In a trading update, the FTSE 100-listed firm reported total sales of £2.643bn for the first quarter of 2017, up 15% on the year earlier at both actual and constant exchange rates, but unchanged on a like-for-like basis which was below forecasts for growth of up to 0.9%.
Reckitt said a continued strong performance from its Health division led by its Mucinex cold and flu medicine and Durex sexual health products was offset by headwinds for its Scholl/Amopé footcare products, which impacted overall performance.
READ: Reckitt confirms plans for food arm strategic review
CLICK HERE: For a daily round-up of all the Proactive news
In early trading, Reckitt shares were 1.4%, or 100p lower at 7,175p.
However, in a note to clients on Reckitt, Whitman Howard analyst Chris Wickham noted that although the reported flat like-for-like growth was beneath the company polled consensus forecast there was an “element of distortion” in the poll due “to one outlying estimate.”
He added that a “sluggish start to the year was anyway well flagged “.
The analyst reiterated a ‘buy’ rating and 9,000p price target on Reckitt.
Rakesh Kapoor, chief executive officer of the Dettol disinfectants to Neurofen painkillers group, said: "Our Q1 results are in line with expectations as macro conditions remain challenging. Against this backdrop our underlying business remains strong.”
He added: “I expect our growth trajectory to improve as we progress through the year and we remain on track to achieve our full year net revenue target of +3% LFL growth*.
Strategic review of Food business continuing
Earlier this month, Reckitt confirmed it had begun a strategic review of its food business, which includes French's, the top-selling US mustard brand.
The foods arm, which had sales last year of £411mln, could fetch more than £2.4bn if sold, according to media reports.
READ: Reckitt in advanced talks on baby food acquisition
A disposal is being considered to help fund its US$16.6bn takeover of US baby food maker Mead Johnson, announced at the start of February.
Kapoor said: “The acquisition of Mead Johnson, to create a global leader in consumer health, is progressing well and we expect completion by the end of Q3.”
He added: “We remain very confident that the strategic direction we are pursuing will continue to drive shareholder value."
-- Adds share price, broker comment --