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Lindt's shares dip after chocolate maker trims guidance

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Lindt's shares dip after chocolate maker trims guidance
Products of Swiss chocolatier Lindt & Spruengli are seen on display at the annual news conference in Kilchberg, Switzerland March 6, 2018. REUTERS/Arnd Wiegmann   -   Copyright  ARND WIEGMANN(Reuters)
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By John Revill

ZURICH (Reuters) – Luxury Swiss chocolate maker Lindt & Spruengli <LISP.S> <LISN.N> trimmed its mid- to long-term sales guidance on Tuesday in a highly unusual move for the company, saying the environment remained tough.

Shares in the maker of Lindor chocolate balls and Lindt chocolate bars fell nearly 4 percent after it said it now expected organic sales growth in the range of 5 to 7 percent a year over the mid to long term, down from its previous 6 to 8 percent target.

Chocolate makers have been grappling with slowing demand for their sweet treats, particularly in the United States where Lindt has needed more time to turn around its Russell Stover brand.

The company, also known for its gold-foil wrapped Easter bunnies, did not give more details on its outlook but analysts at Bank Vontobel described the change as a “kind of revolution for Lindt,” since it has had the same growth guidance for the last 10 years.

Lindt shares were down 3.6 percent in early trading, the second-worst performer on Europe’s Stoxx 600 food and beverage index <.SX3P>.

The company said its organic sales grew by 5.1 percent in 2018, in line with its “around 5 percent” goal despite the ongoing problems in North America, its second biggest market.

Its decision to cut guidance in a sales release with no scheduled news conference “is something of a surprise” although not totally unexpected, said Jon Cox, an analyst at Kepler Cheuvreux.

“We have long anticipated such a cut given its size and position in big developed chocolate markets, lower like-for-like sales in its retail network… and emerging social pressure on sugary, fatty snacks,” said Cox, who rates Lindt at reduce.

Lindt said its total sales last year rose 5.5 percent to 4.31 billion Swiss francs ($4.4 billion), as “strong increases” in Europe and the rest of the world compensated for problems in the United States.

Sales growth in North America slowed to 2.8 percent for 2018, down from 4 percent in the first half of the year.

The market environment “remained very challenging” with saturated chocolate markets in Europe and the United States increasing price competition among retailers, Lindt said.

Last year Nestle agreed to sell its U.S. confectionary business to Italy’s Fererro for $2.8 billion as it shifted away from sugary foods.

Russell Stover, the maker of Whitman’s Sampler assortment boxes, reported a slight decline in sales for last year, while Lindt’s U.S. and Ghirardelli businesses both reported overall sales growth.

Lindt is due to report 2018 results in full on March 5.

(Editing by Thomas Seythal/Darren Schuettler/Susan Fenton)

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