UPDATE 4-Reckitt's quarterly sales, outlook disappoint investors

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By Richa Naidu

LONDON, Feb 28 (Reuters) - Consumer goods group Reckitt on Wednesday missed fourth-quarter like-for-like net sales expectations, and shares slumped 10% as some investors criticised the company's "vague" sales and earnings outlook for 2024.

Reckitt shares fell to their lowest point since March 2020, early in the COVID-19 pandemic.

The maker of Nurofen pain medication and Dettol cleaning products said it is "confident in the year ahead" and expects like-for-like net revenue growth of 2-4%, with mid-single-digit growth for its health and hygiene portfolios.

But investors and analysts said they were "disappointed" with the fourth-quarter results and the company's guidance for 2024.

"Reckitt’s results were disappointing all round," said Waverton Asset Management portfolio manager Tineke Frikkee.

"Volumes were below expectations, price/mix was below consensus and therefore organic growth was a 1.2% decline compared to the expected increase."

Analysts in a company-supplied poll had expected 1.6% growth.

"Margin guidance was more vague than expected. Reckitt guided to profit growing above sales, but not by how much. Consensus expected a 0.7% margin improvement which may be too high," Frikkee added.

The company also took a 810 million pound ($1.02 billion) goodwill impairment in its infant nutrition business in the United States "reflecting higher interest rates and changes in the regulatory environment".

Reckitt's full-year adjusted operating profit was 3.37 billion pounds, down from 3.44 billion pounds.

"While our performance in the fourth quarter was unsatisfactory, we look to 2024 and beyond with confidence," CEO Kris Licht said.

The company also said it had recently identified "an understatement of trade spend in two Middle Eastern markets related to the fourth quarter and prior quarters of 2023".

As a result, full year net revenue was 55 million pounds lower than previously expected.

"Following an investigation, we concluded a small group of employees had acted inappropriately and we are taking necessary disciplinary action," Reckitt said in its earnings statement. "We are confident this is an isolated incident specific to these two markets and does not impact our 2024 outlook and medium-term goals."

Sales volumes at Reckitt's health business, which contributes over 40% of the company's net revenue, fell 2.2% in the fourth quarter, as fewer people bought cold and flu medication. Volumes fell across Reckitt's geographies and business units.

Driven by rising input costs, consumer companies have in recent quarters hiked prices to a degree that many shoppers have turned to cheaper private label brands. Unilever also reported a "disappointing" quarter as it ceded market share.

"For Reckitt, as for a few other companies in the sector, unvarnished communication will be essential in rebuilding investor confidence," Bernstein analyst Bruno Monteyne said. "All the talk of product superiority and growing penetration clashes with the numbers."

Nestle reported full-year organic sales growth below expectations last week as the world's biggest packaged food company continued to hike prices, prompting some shoppers to turn to competing brands.

Consumer health company Haleon is set to report results later this week.

($1 = 0.7914 pounds) (Reporting by Richa Naidu; editing by David Goodman and Jason Neely and Miral Fahmy)