Danone beats sales forecasts, sees end of sharp European, US price hikes

By Richa Naidu, Agata Rybska and Dominique Vidalon

LONDON/PARIS (Reuters) -France’s Danone reported stronger-than-expected first quarter sales on Thursday and said consumers would see “very little” change in prices of its products on shelves in stores in Europe and North America this year as cost inflation eases.

The maker of Activia yoghurt, Evian water and Aptamil kept its goals for like-for-like 2024 sales growth at between 3% and 5%, with a moderate improvement in recurring operating margin.

Danone increased prices by 2.9% during the first quarter, against analysts’ expectations for them to rise 2.7%. The prior fourth quarter, the company had raised prices by 4.3%.

Like Nestle and P&G, Danone is one of several major consumer goods firms which have sharply raised prices over the past two years to manage high input costs, often resulting in acrimonious talks with grocers like Carrefour and Tesco.

Shares in Danone were up 1.4% at 0852 GMT.

“On the shelves there will be very little price movement,” finance chief Juergen Esser told Reuters in an interview. “I think what we will see is, in some instances, a bit more promotional activity.”

Away from Europe and the U.S., Esser said prices would continue to grow in Latin America where inflation remains higher, but not in places like China where “inflation remains very low.”

Cost pressures increased with the COVID-19 pandemic and unusual weather patterns hurting agricultural commodities, and have worsened since Russia’s invasion of Ukraine.

Danone’s like-for-like sales rose 4.1% to 6.79 billion euros ($7.25 billion) in the first quarter, beating expectations for 3.4% growth in a company-compiled consensus of 17 analysts.

Despite investor concerns that price hikes could lead to retailers’ own label brands capturing market share, Danone’s first-quarter sales volumes/mix held up, rising 1.2%, ahead of the 0.8% increase analysts had expected.

“A confident tone on ‘everything going to plan’ in the release is supported by delivery in key areas,” said Jefferies analyst David Hayes.

Shares in Danone have fallen 3.3% since the start of the year, widely underperforming the EURO STOXX Consumer Products and Services index which rose 7.3%.

($1 = 0.9366 euros)

(Reporting by Dominique Vidalon, Agata Rybska and Richa Naidu; Editing by Benoit Van Overstraeten, Jan Harvey and Elaine Hardcastle)


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