Reckitt upbeat on sales outlook as prices rise

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Reckitt and other consumer goods companies, from Procter & Gamble (NYSE:PG) to Nestle, are raising prices sharply this year, enabling them to pass record energy and supply chain cost increases on to consumers.

The higher prices, which are contributing to a global cost-of-living crisis, are denting sales volumes as many people turn to cheaper or private label products. But, so far, falling demand, has been more than offset by price increases.

The maker of Dettol cleaning products and Durex condoms now expects like-for-like net revenue sales to grow between 6%-8% versus its previous estimate of an increase of 5%-8%, it said.

Reckitt, whose products also include Lysol cleaning products and Strepsils throat lozenges, said it continues to target growth in adjusted operating margins.

The company’s third-quarter like-for-like revenue rose 7.4%, above the 6.1% growth analysts had expected in a company-supplied poll.

Sales volumes declined 4.6%. Excluding Lysol sales, which were boosted by Covid-19 this time last year, they declined 1%. Prices for the company’s products rose 12% in the quarter.

Net revenue growth benefitted from the temporary uplift in demand for infant formula in the United States due to a temporary shortage, prompted by rival Abbott Laboratories (NYSE:ABT) recalling products in Febriary.

Reckitt, which has held off on price increases in this category, said it estimated this benefit to have added about 3% to net revenue growth in the third quarter.