Reckitt Benckiser has cut its annual sales growth forecast and raised prices across parts of its European portfolio as the economic fallout from the Iran war adds to pressure on consumers and multinational consumer goods companies.
The London-listed group, whose brands include Gaviscon, Vanish and Lysol, now expects like-for-like revenue growth of 3.5 to 4.5 per cent across its core business this year, down from previous guidance of 4 to 5 per cent.
Shares in the FTSE 100 company fell 6 per cent in morning trading on Tuesday after the group reported weaker-than-expected sales in North America, where temporary manufacturing problems restricted supplies of Lysol products.
The downgrade highlights the challenges facing consumer goods companies as rising costs collide with increasingly price-conscious shoppers, forcing businesses to balance higher prices against the risk of losing customers to cheaper competitors.
Reckitt said it had introduced “selective pricing actions” across Europe to offset inflation linked to the conflict in the Middle East. Prices rose by 4 per cent in the three months to September 30.
The measures helped return its Europe, Australia and New Zealand division to growth, with like-for-like sales increasing 0.8 per cent in the third quarter. But sales volumes fell 3.2 per cent, suggesting higher prices rather than stronger demand were supporting revenue.
“Consumer confidence across the area remains subdued, with elevated promotional activity and value-seeking behaviour driving share growth for discount retailers, which has impacted volumes, particularly in germ protection,” the company said.
North America proved a further drag, with like-for-like sales falling 1.3 per cent during the quarter. Chief executive Kris Licht said demand for Lysol remained strong but the business had struggled to keep pace with customers.
“North America was below our expectations. While consumer demand for Lysol remains strong, temporary manufacturing constraints limited our ability to fully meet demand,” he said.
Reckitt expects both Lysol and its wider North American operations to recover in the final quarter as manufacturing problems are resolved.
Across its core business, excluding Mead Johnson Nutrition and the disposal of its Essential Home division, like-for-like sales increased 3.3 per cent.
Chris Beauchamp, chief market analyst at IG, said investors should not allow the American weakness to overshadow the broader performance.
“Growth looks much more broad-based, and with North American trading expected to recover in the fourth quarter, there are still reasons to be optimistic,” he said.
The immediate challenge for Reckitt is whether further price increases can protect margins without accelerating the shift towards discount alternatives. With household budgets under pressure and geopolitical uncertainty driving costs higher, the company faces a delicate balancing act between preserving profitability and maintaining sales volumes.
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