Shares in Reckitt Benckiser (RKT) plunged to a 52-week low after the consumer health and hygiene giant’s Q1 sales missed estimates.
The FTSE 100 company pinned the blame on disruption in the Middle East, a weak finish to the cold and flu season and ‘challenging’ trading in Europe.
The company also warned of a possible £130 million-to-£150 million cost hit should oil prices stay high due to the Iran war. And the Strepsils-to-Gaviscon maker said consumer demand would also be impacted if commodity prices remain elevated.
Q1 sales disappoint
‘Core Reckitt’ like-for-like sales rose 1.3% in the quarter to March 2026. That was below the 2.9% called for by consensus. It also represented a significant slowdown on the 5.9% growth delivered in Q4.
The Dettol maker blamed the miss on ‘very low seasonal incidence’ – less cold and flu bugs going around – as well as ‘weak categories in Europe and geopolitical disruption’.
Focused on the core
In common with Nestle (NESN) and Unilever (ULVR), Reckitt Benckiser has simplified its sprawling business.
Following the £2.2 billion sale of its Essential Home cleaning division to Advent International, it has sharpened its focus on higher growth, higher margin brands. These range from Durex and Lysol to Strepsils, Nurofen and Finish.
Stripping out sales of over-the-counter cold and flu products, Core Reckitt delivered 3.1% growth spearheaded by emerging markets.
Holding firm on guidance
Despite the uncertain demand backdrop, Reckitt Benckiser maintained its FY26 guidance for like-for-like sales in the 4% to 5% range.
CEO Kris Licht explained: ‘This will be driven by sequential growth from our market-leading Powerbrands, as the season resets and we continue to launch superior innovations including Mucinex 12hr Cold and Fever, improved performance in Europe and continued strong growth across China, India and non-seasonal North America.’
Reckitt Benckiser’s shares are down 35% on a five-year view and have shed 25% of their value in the year-to-date. This has created a buying opportunity for patient investors.
Reckitt is a cash generative business blessed with strong brands and pricing power. The FTSE 100 giant is also returning capital to shareholders through buybacks and dividends.
Catalysts for a bounce would include a return to growth in Europe and North America, since emerging markets are doing the heavy lifting at present.
A sale of its troubled baby formula business Mead Johnson would also boost sentiment towards the stock. Reckitt is considering options for Mead Johnson, which has reportedly attracted interest from Danone (BN) in recent weeks.
Read the press release here: https://www.reckitt.com/investors/regulatory-news/
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