Consumer goods group Reckitt’s like-for-like sales growth beat estimates in the first quarter as more people bought its Lysol, Dettol and Finish cleaning products even as prices rose.
Following the company’s trading update on Wednesday, shares were up nearly 6% in morning trade.
‘Contingent Liabilities’
Reckitt also reiterated that it faces “contingent liabilities” – a term used for those dependent on future events – from a product liability suit against its Mead Johnson infant formula in the United States.
Mead Johnson was ordered by a jury in March to pay $60 million to the mother of a premature baby with an intestinal disease who died after consuming Enfamil Premature 24 baby formula.
Mead Johnson said in the same month that they intend to appeal the ruling.
The chief executive Kris Licht said in a call with journalists, “It’s a complex litigation. It’s early stages.”
Like-For-Like
The company said it was on track to meet full-year revenue and profit targets, led by mid-single-digit growth across its health and hygiene businesses.
An analyst with Jefferies David Hayes said, “We could expect the share price to outperform peers today, somewhat constrained by the ongoing litigation uncertainty.”
Reckitt’s quarterly like-for-like net sales rose 1.5%, above the 0.9% growth estimated by analysts in a poll by the company.
Licht said, “We continue to benefit from carryover pricing and consumers trading up to our premium innovations.”
Enticing Customers
Consumer companies, including Reckitt and Nestlé, have invested heavily in product innovation in an effort to win back shoppers.
During the Covid-19 pandemic and the more recent cost-of-living crisis, brands saw customers move to cheaper products.
The companies hope that improvements to existing products will entice customers back, allowing them to raise prices without hurting volumes.
Reckitt said first-quarter volumes rose 2.9% at the company’s hygiene business – it’s largest by revenue.
However, the price/mix metric that shows how much its products sold for rose by 4.2%.
Its overall price/mix ratio rose 2% while volumes declined by 0.5%.
This beat analysts’ expectations of a 2.2% price/mix gain and a 3.2% volume decrease.
Read More: Reckitt Creates 'Air Sanitising Spray' Effective Against Coronavirus
