Durex maker Reckitt's shares slump as hazy outlook masks emerging market-led growth

Thu, 05th Mar 2026 17:24

* Reckitt shares drop over 6% even as Q4 sales beat expectations

* Emerging markets spearheading LFL revenue growth

* CEO identifies emerging markets as 'must win'

* Analysts put share fall down to clouded guidance on margins, EPS

LONDON, ‌March 5 (Reuters) - Shares in Reckitt plunged more than 6% on Thursday as the market evaluated the consumer goods company's hazy guidance on margins ⁠and earnings per share, even as it reported a quarterly sales beat ⁠led by double-digit emerging market growth.

Along with rivals such as Nestle and Unilever , Reckitt has been fine-tuning its portfolio to focus on high-growth, high-margin brands to try to boost sales volumes. Reckitt finalised the $4.8 billion divestiture of its Essential Home division to private equity firm Advent International on December 31, but on Thursday suggested that ‌core margins could be undermined by stranded costs as a result, which some analysts said was contributing to Reckitt's sharpest daily share-price drop in 11 months.

CFO Shannon Eisenhardt said that a higher effective tax rate and adverse foreign exchange impacts represented a 7% headwind to EPS.

"We think the reaction may be reflecting a long positioning in what is seen as key defensive staples in the face of disappointment on EPS," JPMorgan analysts said, also noting the lack of disclosure on the mechanics of the Essential ‌Home separation ahead of Thursday's results.

'MUST-WIN' EMERGING MARKETS DELIVER GROWTH

The maker of Durex condoms and Lysol cleaning products reported total group like-for-like net revenue growth of 5.4% for the quarter ‌ended December 31, compared with 4.7% expected in a company-compiled consensus, led by a 10th consecutive quarter of double-digit growth in emerging markets. "The runway for growth is so significant," Licht told Reuters, highlighting emerging markets' opportunities for organic growth, with the number of middle-class households in these markets now greater than Europe and the U.S. combined.

"From a standpoint of where we have to win, this is absolutely a ‌must-win set of markets for us," Licht said. Revenue in emerging markets surged 17.2%, led by China and India, while Europe recorded a quarterly drop of 4.5%.

Barclays analysts said the emerging markets segment was "doing the heavy lifting for the group and provides ⁠a reliable growth ⁠engine at a time when developed markets category growth is sluggish." The British company, which ‌also produces Nurofen tablets and cold remedy Lemsip, said it expected the challenging trading environment in Europe to continue and warned that it would suffer in the first quarter from a milder cold and flu season. Reckitt, whose volumes declined by 0.2% in the fourth quarter, expects ‌its core business to grow at 4% to 5% this year, but declined to give explicit margin guidance for 2026.

"The margin benefit from the divestiture of essential home is being offset by stranded costs and FX," Quilter Cheviot analyst Chris Beckett said. (Reporting by Alexander Marrow; Editing by Emelia Sithole-Matarise, Tomasz Janowski, Susan Fenton and Mark Porter)