A slowdown in North America has been cited by luxury Swiss chocolate maker Lindt & Spruengli in its decision this week to cut guidance in a sales release, which analysts says is an unusual move for the company.
Sales growth in the territory slowed to 2.8% for 2018, down from 4% in the first half of the year, the company reported.
Reuters reported that shares fell nearly 4% after the announcement.
The market environment “remained very challenging” with saturated chocolate markets in Europe and the United States increasing price competition among retailers, Lindt said.
Alain Oberhuber CEO and consumer goods analyst at MainFirst Schweiz AG, said: “Although we do not expect any market earnings estimates changes, the lower than the long-term organic sales growth guidance comes as a slight negative surprise.”
Reuters said it now expected organic sales growth in the range of 5 to 7% a year over the mid to long term, down from its previous 6 to 8% target.
In an already tough US market for sweet treats, Lindt has needed more time to turn around its Russell Stover brand.
“It looks as if the worst is over with the company's US business, Russell Stover,” said Oberhuber. “Guidance for the medium term is now at organic sales growth of +5-7% (vs. pre Russell Stover acquisition of +6-8%) and an EBIT margin increase of +20-40bps (unchanged).”
Reported sales, which include currency swings, rose 5.5% to 4.31 billion Swiss francs (S$5.91 billion), as "strong increases" in its Europe and the Rest of the World regions compensated for problems in the United States, Lindt said.
Russell Stover, the maker of Whitman's Sampler assortment boxes, reported a slight decline in sales during the year, while its Lindt USA and Ghirardelli businesses both reported overall sales growth, said Lindt, without announcing further details.
“Although the company reports that the Russell Stover sugar-free chocolate line with stevia extract performed well and extended its market share, and the re-launch of the top-selling assorted pralines for 2019 received a positive feedback from retailers, the company stated that the Christmas season performance was ‘merely satisfying’. Both events combined account for around 20%-25% of Russell Stover's revenues,” Oberhuber told Confectionery News.
Lindt is due to report 2018 results in full on March 5.
