Lindt & Spruengli cuts sales outlook as North America weighs

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Lindt & Spruengli cuts sales outlook as North America weighs

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By Michael Shields ZURICH (Reuters) – Swiss chocolate maker Lindt & Spruengli <LISN.S> cut its 2017 revenue growth forecast on Tuesday after another weak performance in North America, where a revamp of its Russell Stover business is proving tougher than expected. Chief Executive Dieter Weisskopf attributed problems in the key U.S. market to difficulties transforming Russell Stover and the changing nature of retail channels as online sales gain importance and drug store outlets adapt to growing demand for healthier snacks. About 40 percent of Lindt’s U.S. woes derive from the Russell Stover business it bought in 2014, with 60 percent attributable to a sluggish chocolate market, he told Reuters. Four fifths of Russell Stover’s confectionery is seasonal, which means it takes longer to change products and packaging. Among the planned changes is a relaunch of the Missouri-based company’s sugar-free line in the second half. “Now we are in season three and we are optimistic that for the next October-December holiday season we have the right mix and have made the changes that are necessary,” Weisskopf said. The maker of Lindor chocolate balls and gold foil-wrapped Easter bunnies forecast that revenue growth in 2017 would beat that of industry peers but would fall slightly short of the 6 percent achieved last year while operating margins would rise. The company, which had previously expected sales growth to be broadly in line with 2016, maintained its mid-term growth targets. First-half net profit rose 5.7 percent to 76.3 million Swiss francs (61.84 million pounds) on sales up 3.1 percent to 1.549 billion francs. That equated to organic growth — stripping out acquisitions and currency swings — of 3.6 percent, missing expectations in a Reuters poll of analysts. Excluding Russell Stover, organic growth was 6.6 percent. Organic sales in Europe were up 6 percent in the first six months while North American sales slipped by 3 percent. Lindt’s non-voting certificates <LISP.S>, which are more widely traded than its shares with voting rights <LISN.S>, fell 6 percent before paring losses to 1.5 percent by 1021 GMT. The company’s first half is historically weaker than the second and it expects sales growth to accelerate in the last six months of the year, with Weisskopf adding that the group remains well placed despite a consumer shift to healthier eating. “We are positioned clearly in the indulgence premium position. That means we are not for a consumer looking for health, we are for a consumer looking for indulgence,” he said. Lindt gained only a marginal boost from a plunge in cocoa bean prices amid a market glut because it relies heavily on cocoa butter, prices of which fell less dramatically. “In all likelihood we will see again rising prices over the next 12 months if you look purely at the cocoa market,” he said, though he did not expect Lindt to raise its prices over the period.

(Reporting by Michael Shields; Editing by John Revill and David Goodman)
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