Chocolate maker Lindt & Spruengli's sales miss leaves bitter taste (updated)

Chocoladefabriken Lindt & Spruengli AG

16/01/2018 10:41

* Organic sales up 3.7 pct, weakest growth since 2009 
    * Russell Stover business still struggling 
    * Shares down nearly 2 percent 
 
 (Rewrites, adding analysts, share price reaction) 
    By John Revill 
    ZURICH, Jan 16 (Reuters) - Swiss chocolate maker Lindt & 
Spruengli  LISP.S   LISN.S  reported its weakest sales growth in 
nearly a decade on Tuesday, hurt by ongoing problems at its 
Russell Stover business. 
    The group's shares fell nearly two percent in early trading 
after it missed its own long-term target and the average of 
analyst estimates, chiefly due to a sales drop in North America 
driven by a decline at Russell Stover, the maker of chocolate 
assortment boxes. 
    Lindt's 2017 organic sales growth slipped to 3.7 percent 
from 6 percent a year earlier, its lowest level since 2009. 
    Some analysts said they were concerned about the lack of a 
new efficiency plan to deal with the downturn, and added that 
the company's long-term growth target of 6 to 8 percent could be 
under threat. 
    "Lindt's premium valuation is built on the back of its 
strong organic sales growth, mostly in mature markets in 
whatever conditions. Denting that reputation is likely to dent 
the multiple," said Jon Cox, an analyst at Kepler Cheuvreux. 
    Lindt, known for its gold foil-wrapped chocolate bunnies,  
trades at nearly 40 times earnings while members of the Stoxx 
600 Food and Beverage Index  .SX3P  trade at 25 times, Reuters 
data show. 
    Lindt's organic sales increase lagged the Reuters poll 
average of 4.2 percent.  urn:newsml:reuters.com:*:nL8N1P73RY  
    But a stronger euro helped annual sales rise by 4.8 percent 
in Swiss francs to 4.09 billion Swiss francs ($4.24 billion). 
    The group based in Kilchberg on Lake Zurich will report full 
earnings on March 6.  
    It kept its outlook for 6-8 percent organic sales growth and 
increasing margins by 20-40 basis points. 
    "Given the deteriorating trend ... we believe more investors 
might start to question the achievability of that target going 
forward," said Helvea analyst Andreas von Arx. 
    "Whereas Nestle and Unilever execute in portfolio-improving 
deals, Lindt's key step has been the expensive, non-delivering 
Russell Stover acquisition." 
    Chocolate confectionery demand was sluggish last year as 
consumers often preferred healthier snacks, but Lindt has 
overcome the trend thanks to its positioning in the 
faster-growing premium price segment. 
   Lindt said organic sales in Europe rose 6.2 percent and by 
12.4 percent in the rest of the world. 
    But North America remained a headache, with sales falling 
1.6 percent in the market where Lindt advanced to the number 
three position in chocolate with its Russell Stover buy in 2014. 
    Russell Stover, the maker of Whitman's Sampler boxes of 
chocolates, struggled amid a weaker market in general and 
difficulties experienced by some of its retailers, including 
drug stores and department stores, Lindt said. 
    Lindt has been trimming Russell Stover's product lineup and 
cutting back on unprofitable promotions as it aims to turn 
around the business. It said the overhaul was "progressing." 
    ($1 = 0.9637 Swiss francs) 
 
 (Editing by Michael Shields) 
 ((John.Revill@thomsonreuters.com; +41 58306 7022; Reuters 
Messaging: john.revill.thomsonreuters.com@reuters.net)) 
 
Keywords: LINDT RESULTS/