Reckitt Benckiser shares sank on Wednesday after the group posted disappointing Q1 trading figures that missed expectations.
Reckitt’s North American and European over-the-counter medicines business took a notable knock in the first quarter, with seasonal OTC revenue falling into the double digits as a weak cold and flu season left retailers cutting inventory throughout the period.
The softness dragged the region’s overall like-for-like net revenue down 0.9%, despite underlying volumes rising 1.5% and a strong showing from non-seasonal brands led by Lysol.
Low incidence rates through the tail end of the cold and flu season were the main culprit, compounding a sluggish category backdrop and prompting destocking by key retailers.
The weakness in seasonal OTC also weighed heavily at the group level. Core Reckitt like-for-like growth came in at just 1.3%, but strip out seasonal OTC and the underlying rate jumps to 3.1%, a gap that lays bare just how much the soft cold and flu season is masking.
The drop in Reckitt Benckiser shares on Wednesday means the share price has now given back 18 months’ worth of gains from September 2024 to March this year in less than two months.
“Reckitt Benckiser’s Q1 trading update delivered a disappointing start to the year, with shares opening down more than 5% this morning as investors reacted to the earnings miss,” said Adam Vettese, market analyst for eToro.
“Core Reckitt posted like for like net revenue growth of just 1.3%, well below consensus and the group’s 4-5% medium-term target. The weakness stemmed from a markedly soft cold and flu season, retailer destocking and tough trading in developed markets, where Europe/ANZ fell 4.2% and Household Care dropped 7.6%.”
Chief executive Kris Licht is pinning hopes for a recovery on the June launch of Mucinex 12 hour Cold and Fever, a product the company is billing as category-creating, alongside the lapping of last year’s Mucinex Sinus PE reformulation. Management expects a meaningful lift in seasonal OTC from Q2 as initial shipments hit shelves.
Beyond the medicine’s weakness, Emerging Markets did the heavy lifting with 7.6% like-for-like growth, led by double-digit gains in China and India, while Europe slipped 4.2% amid heightened promotional pressure in auto and its own weak cold and flu backdrop.
Reckitt held full-year guidance unchanged, targeting 4% to 5% like-for-like growth for Core Reckitt.