Higher prices reduce purchases but increase Reckitt’s revenue

Businesses said they raised prices more than enough to keep earnings soaring in the latest quarter.

But these price increases – on average about 12% – force customers to choose other products or simply reduce the amount of goods consumed.

Like-for-like profit was still up 7.6% as Reckitt’s 4.6% fall in sales volume did not offset the rise in cost per item sold.

“Reckitt delivered another quarter of broad-based growth amid challenging market conditions as we continue to innovate and improve our market execution,” said chief executive Nicandro Durante.

“We have an excellent portfolio of trusted, market-leading brands in high-margin, fast-growing categories and a strong culture of ownership and delivery.

“My priority is firmly focused on continuing to execute on our strategic path to deliver sustainable mid-2020s growth and an adjusted operating margin in the mid-20s.”

The business raised its growth target to increase net income from 5% to 8% to 6% to 8%.

But shares fell about 4.5% as slowing business sales showed pressure on the economy.

“The slowdown in quarterly sales growth at consumer goods business Reckitt Benckiser and the absolute drop in the volume of goods sold have highlighted how much pressure on household budgets is having an impact,” said AJ Bell Head of Investment Analysis Leith Khalaf.

“The company also offered no comfort to shoppers facing higher shelf prices as it vowed to continue to pass on higher costs.

“From Reckitt’s perspective, it at least demonstrates that its brands retain some pricing power.”