Weak Flu Season Tempers Reckitt Growth Boost From Pandemic-Led Cleaning
Nivea maker Reckitt Benckiser Group reported a higher-than-expected jump in quarterly sales as households stuck with heightened cleaning regimens a year into the COVID-19 pandemic, and the company backed its full-year outlook.
Shares, however, fell nearly 2% in morning trade as a weak flu season saw fewer people reach for cold remedies and declining birth rates hit sales of baby formula products.
The Slough-based company reported a 4.1% rise in like-for-like sales for the first quarter, higher than the 2.4% growth analysts had expected, according to a company-supplied consensus, led by Lysol and double digit growth for Airwick fresheners and Finish dishwasher pods.
Sales fell 13% in its health business, which makes Mucinex cough syrup and Dettol soaps, due to a 90% drop in cases of cold and flu as people wore masks and relaxed social distancing measures in markets with high rates of vaccination.
Chief Executive Laxman Narasimhan said that in markets with few cases and high vaccination rates, people have eased off on washing their hands or using hand sanitisers, although use was still higher than before the pandemic.
For example, sales of Dettol showed strong growth in India, but declined in China, which has nearly re-opened.
Some other products are doing well, however.
Sexual wellness is seeing an uptick in markets that are relaxing social distancing measures, leading to double-digit demand for Durex condoms in the quarter, Narasimhan said.
China was a big driver, but the company is also seeing resurgent demand in parts of the United States, Southeast Asia and Europe.
In India, reeling under a devastating second wave of coronavirus, the company "is seeing no impact as of now," he said, while adding that it was increasing its marketing spend around messaging to help rein in the virus.
Reckitt joins a list of consumer product companies boosting marketing spend to retain 2020 gains in market share, helping firms such as WPP, the world's biggest advertising company, to post an earlier-than-expected recovery in sales growth after a damaging pandemic year.
The company, which rebranded itself to Reckitt from RB last month, kept its forecast for full-year sales growth between flat and up 2%, saying it remained on track for its medium-term goal to grow revenue 4% to 6%.
"This is a great start to the year, well ahead of consensus, and shows that disinfectant demand remains very strong even this far into the crisis," said Alicia Forry, an analyst at Investec.