Nestle cuts outlook again after sales disappoint

KitKat maker Nestle has cut its sales outlook once again despite efforts to slow price rises to help woo back cost-conscious consumers.

The Swiss group, which makes a raft of well-known household brands also including Nescafe coffee and Cheerios, reported a weaker-than-expected 2% rise in underlying sales for the nine months of 2024 so far.

It said it now expects underlying sales to rise by around 2% over the full year, below previous guidance for at least 3% growth.

The consumer goods giant had already trimmed its sales outlook in July, down from its previous estimate of around 4%.

The sales woes come despite Nestle slowing price rises amid signs that high prices in recent years have sent consumers looking for cheaper non-branded alternatives.

New chief executive Laurent Freixe said: “Consumer demand has weakened in recent months, and we expect the demand environment to remain soft.”

The group also trimmed its profitability forecast for underlying trading operating profit margin to around 17% in 2024, against previous guidance for a slight improvement on last year’s 17.3%.

Nestle is still increasing prices, but by a slower pace of 1.6% on average globally, down from 2% in the first half, following “unprecedented increases in the prior two years” as it grappled with soaring inflation.

It said: “In the third quarter, pricing increases in confectionery and coffee linked to higher input costs were partly offset by the impact of promotional activity in pet care and dairy.”

Nestle also put the sales pressure down to “consumer hesitancy towards global brands, linked to geopolitical tension” in some markets.

Mr Freixe took on the top role in September when former boss Mark Schneider abruptly quit after several quarters of weak trading.

On Thursday, the new boss also announced a revamped leadership team and operations structure as he puts his stamp on the business.

Changes include plans to cut the size of Nestle’s executive board, merge the company’s Latin America and North America units, and combine its Greater China and Asia, Oceania and Africa businesses.

Chris Beckett, head of equity research at Quilter Cheviot, said “Nestle remains a good company but it is going through a challenging period.

“The new chief executive is implementing quite a wide-ranging internal reorganisation to help get the business back on track.

“It had perhaps got a little too inward-looking and thus a reset is a good strategy to undertake.”