Core like-for-like revenue rose 3.3%, below the 3.6% analysts expected, and North American sales fell 1.3%. Reckitt lowered its full-year range to 3.5% to 4.5% growth. The shares fell about 5% in early London trading.
Reckitt's quarter fell short mainly in one region, and the company says much of the problem is temporary.
The maker of Lysol said core like-for-like net revenue rose 3.3% in the third quarter, below the 3.6% analysts had expected. Almost all of it came from price and mix, up 3.2%, while volume rose just 0.1%. In North America, like-for-like revenue fell 1.3%, which Reckitt attributed mainly to temporary manufacturing constraints on Lysol, along with tough comparisons with a strong year-earlier quarter, retailer order timing and a weaker consumer environment.
The company cut its full-year guidance for core like-for-like growth to 3.5% to 4.5%, from 4% to 5%, citing the Lysol disruption and a slowdown in its vitamins, minerals and supplements category in China. It expects emerging markets to grow at a high-single-digit rate.
Reckitt shares were down about 4.6% at 5,234 pence at 5:38 a.m. Eastern.
Price and mix, not volume
The composition is the more important number. Growth of 3.3% with volume flat means price and mix are doing the work, and consumers overall are not buying more. That leaves the company dependent on pricing, and exposed if that power fades.
Mostly a supply problem
The North American decline is a different kind of miss. To the extent Lysol was constrained by capacity rather than demand, sales should recover as supply catches up. The questions are how long the constraint lasts, whether retailers gave the shelf space to competitors in the meantime, and how much of the weakness reflects the softer consumer the company also cited.
Reckitt is continuing a £500 million share buyback started in August, of which £90 million had been completed by Oct. 23.
Two readings
One reading is that this is a temporary stumble. The North American shortfall is tied mainly to a fixable supply issue, emerging markets are strong, pricing is holding and the buyback continues.
The other is that the guidance cut confirms a slower business. Volume growth is close to zero, the company has lowered its range, China's supplement category is slowing, and the North American miss includes a weaker consumer as well as a supply problem.
What to watch
When Lysol capacity returns to normal, fourth-quarter North American trends, China vitamins and supplements, emerging-market growth and read-through to U.S. consumer staples such as Clorox when they report.