Nestle Sales Growth Slows Sharply as Consumer Demand Remains Weak — Update
By Dominic Chopping
Nestle's organic sales growth slowed sharply in the first months of the year as consumer demand remained weak, particularly in North America, while supply-chain disruptions continued to hold back volumes.
The Swiss maker of KitKat chocolate bars and Nescafe coffee said Thursday that organic sales rose 1.4% in the first-quarter, missing a company-compiled consensus of 2.9% and compared to 9.3% in the same quarter last year.
Overall reported sales fell 5.9% to 22.09 billion Swiss francs ($24.14 billion), just shy of a company consensus of CHF22.37 billion, but it maintained full-year guidance ahead of an expected improvement in volumes.
The company began easing the pace of price hikes in the quarter after it acknowledged earlier this year that the unprecedented inflation seen over the last couple of years had turned many consumers away and hit demand.
Like many other packaged food producers, Nestle has raised its prices to pass on higher costs, lifting them by an average of 7.5% last year, which pushed some shoppers to move to cheaper store brands or remove certain goods from their shopping list altogether.
It raised prices by 3.4% in the first quarter on average.
Nestle said Thursday it is seeing significant pressure from lower income consumers in the U.S., where price increases over the last two years and the reduction in the U.S. supplemental nutrition assistance payments from the second quarter last year significantly reduced consumer's purchasing power.
"That resulted in some weakness all throughout the second half of last year and we saw that continued weakness now in the first quarter of this year," Chief Executive Mark Schneider told journalists Thursday.
However, the U.S. benefits from a very strong jobs market with continued income increases, so as inflation continues to ease people will essentially "restore and recover" when it comes to their purchasing power and the company's premium segment continues to do well, he added.
Write to Dominic Chopping at dominic.chopping@wsj.com
(END) Dow Jones Newswires
April 25, 2024 02:40 ET (06:40 GMT)
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