Nestle – Pet Care, Kitkats, and Price Hikes Push Q1 Sales Ahead of Expectations

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Nestle (OTCMKTS:NSRGY) has reported first-quarter sales of CHF 23.5bn, reflecting organic growth of 9.3%. Price hikes of 9.8% drove growth as volumes were slightly lower, down 0.5%. Pricing efforts are helping offset ongoing cost pressures.

There was broad-based growth across geographies and categories, with Purina PetCare as the most significant contributor. E-commerce sales grew by 13.6%, reaching 16.2% of total Group sales.

Plans are underway to establish a joint venture for Nestle’s frozen pizza business in Europe. The deal should close in the second half of 2023, subject to the required approvals.

The Group remains on track to deliver full-year organic sales growth of 6-8%, underlying operating margin of 17.0-17.5%, and underlying earnings per share growth of 6-10%.

Nestle’s Earnings

“Nestle’s showing just how important it is to have a strong suite of brands, which have allowed the consumer giant to push through some pretty hefty price hikes with little impact on volumes.

From Purina PetCare to KitKat, Nestle’s host of strong brands are keeping their appeal despite rising prices and a consumer coming under ever-increasing pressure to cut back spending. Double-digit growth in confectionery and Petcare was impressive.

It’s as important now as ever to keep sales moving in the right direction as higher input costs continue to linger. Nestle seems to have that under control for now, and it’s always pleasing to see full-year profit guidance remaining intact when you consider the challenges facing both the business and the consumer.

It’s hard to knock performance, and there’s scope for sustainable growth across the business. The only thing keeping a check on the positive view is on the valuation side, which looks to have priced in a good chunk of those strengths.”

Article by Matt Britzman, Equity Analyst at Hargreaves Lansdown