Full-year 2017 sales
Lindt continues to grow, but Russell Stover drags down US sales
The Swiss group today posted its highest ever sales in its 175-year history. However, organic sales in its NAFTA region declined.
Overall group sales were up 4.8% to CHF 4.1bn ($4.25bn) in 2017 as the group saw market share gains in most markets and strong growth in Europe.
But organic sales in the NAFTA region dropped 1.6% due to declines at Lindt’s Russell Stover business.
Overall chocolate market
Retail value sales in the global chocolate confectionery market grew +3.3% in 2017 to $102.5bn, according to Euromonitor International.
The positives: Retail and Europe
“Given the challenging conditions, such as largely saturated chocolate markets, a changing retail landscape and growing pressure on prices, this represents a good performance,” said the company in a release.
Lindt highlighted strong performance in its Rest of the World segment (markets outside the US and Europe), fueled by the group’s own retail stores in markets such as Japan and Brazil.
Lindt’s global retail network generated CHF 0.5bn ($0.52bn) sales for the first time and grew double-digits as the firm added 50 outlets in 2017, taking its worldwide store network to 410 shops.
Lindt also reported 6.2% organic sales growth in Europe, driven by gains in the UK, Germany and Switzerland.
Lindt 2017 organic sales growth
- Group sales: +3.7%
- Europe: +6.2%
- NAFTA: -1.6%
- Rest of the World:+12.4%
The negatives: The US and Russell Stover
The company recorded double-digit growth in Canada, but Russell Stover, which it acquired in 2014 for around $1.4bn, hampered its US performance.
“Russell Stover faced a decline in sales, caused by a weaker market in general, difficulties experienced by individual retail partners and the adjustments of its product portfolio,” said Lindt.
It said drug stores - an important channel in US chocolate - were repositioning their offerings, while fewer consumers were visiting department stores.
Lindt began transforming Russell Stover from a luxury boxed chocolate business to an everday brand from 2015 with a trimmed product portfolio and packaging revamp. More recently, it launched a sugar-free Russell Stover line with stevia extract.
Lindt’s other US businesses – Lindt USA and Ghirardelli - recorded slight organic sales growth in 2017.
Growth target and analyst’s view
The company set a mid- to long-term strategic sales growth target of 6-8% and the improvement of its operating margin by 20-40 basis points.
In an analyst’s note, Alain Oberhuber of MainFirst Schweiz said Lindt’s full-year organic growth of 3.7% was below expectations of 4.1%.
“The US business remains a significant drag on growth. Without Russell Stover, total sales would have increased organically by +5.9%,” he said.
He added Lindt faced aggressive competition in France over the Christmas period and said he expects price competition will continue in the market in 2018.
However, the analyst maintained his neutral rating of the company.
Lindt will release its profit performance for 2017 on March 6, 2018.
