Nestle cuts sales target as food sales disappoint
Nestle became the latest company to be hit by the global slowdown affecting food manufacturers after posting its weakest underlying sales growth in more than a decade.
The Swiss maker of Kitkat bars and Nescafe coffee cut its sales target for the year, saying European markets would continue to be deflationary, while certain developing markets stay weak.
It forecast no near-term blanket price increases in Western Europe, charting a different course to rival Unilever, whose push to raise prices in Britain in response to a falling pound landed it in a public spat with retailer Tesco last week dubbed "Marmitegate".
"The pound is going south and that is going to have some effect on certain imports and you cannot defy gravity," Nestle Chief Executive Paul Bulcke said on Thursday.
"But I don't say ... our costs go up 1 percent - bang, we pass that straight on to the consumer – they would punish you."
The company cut its forecast for the year, saying it now expected organic sales to rise by 3.5 percent after posting a 3.3 percent increase for the first nine months.
Analysts had on average expected organic growth -- which strips out foreign exchange and acquisitions -- of 3.7 percent, according to a Reuters poll.
It would mark the fourth year in a row that Nestle has fallen below its long-term target of 5 to 6 percent growth, raising pressure on incoming chief executive Ulf Mark Schneider, who will take over in January.
“Investors can hold out hope that the worse it gets, the more likely Schneider will take aggressive actions," Liberum analysts said in a note. "However it may get worse before it gets better."
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