Reckitt Benckiser Group reported lower-than-expected first-quarter sales, due to weakness in its health business, but stood by its full-year forecast, relying on improvement as the year goes on.
The maker of Strepsils and Mucinex cold medicine and Lysol cleaners said on Thursday that quarterly like-for-like sales rose 1%. On that basis, analysts on average were expecting a 1.8% rise, a company-supplied consensus showed.
Like-for-like sales rose 3% in Reckitt's hygiene and home business, but were flat in health as a 5% rise in infant formula was offset by a 9% drop in over-the-counter medicines.
The company blamed an unusually weak cold and flu season in the United States and parts of Europe, high retailer inventories and loss of market share to private label for the decline.
Other health products, including Airborne vitamins and Scholl footcare products, were flat.
Restoring The Health Business
"Restoring our performance in our health (business unit) remains our top priority," outgoing Chief Executive Rakesh Kapoor said in a statement.
He said the company is looking to do this through new products and by investing in e-commerce, its brands, and to make its business more resilient.
Analysts worried that such investments will take a toll on margins, which are forecast to be flat this year.
"We completely agree with this, but are not convinced it can be achieved without further margin attrition," said RBC Capital Markets analyst James Edwardes Jones.
Reckitt shares were down 1.9% in early London trading.
Net revenue was £3.16 billion, also missing analysts' estimate of £3.19 billion.
The company stood by its full-year forecast, calling for a flat adjusted operating margin and like-for-like sales growth of 3% to 4%, saying growth would be weighted toward the second half of the year.
The company gave no new information on its search for a successor to CEO Kapoor, who plans to retire this year, its "RB 2.0" plan to separate its businesses into two units under the same roof by mid-2020, or its involvement in ongoing investigations and litigation related to Indivior, a business it owned until 2014.