Nestle Gets Boost From U.S. Consumers Spending More on Pets

(Bloomberg) -- Nestle SA is getting a boost from U.S. consumers spending more on their pets as economic expansion buoys household finances.

First-quarter sales rose 2.8 percent on an organic basis, the Vevey, Switzerland-based maker of Purina Dog Chow and KitKat chocolate said Thursday. Analysts expected 2.5 percent. The shares rose 0.5 percent in Zurich.

Chief Executive Officer Mark Schneider is revamping the world’s largest food company around businesses like pet care, coffee and bottled water after jettisoning the U.S. confectionery business and adding healthy food brands. These “deep” changes take time, according to Vontobel analyst Jean-Philippe Bertschy, who expects organic growth to accelerate in coming quarters.

“After several disappointing quarters, Nestle was able to revert the trend and to deliver above market expectations,” Bertschy said. “The start of the year looks good for Nestle.”

In the U.S., where Nestle generated about a third of its revenue last year, the pet-care business improved amid stronger demand for natural products and increased online sales. Globally, the business accounted for 14 percent of Nestle’s sales last year.

Nestle did not quantify the gains in the U.S. but said that pet care recorded the highest organic growth of any of its main product categories in the first quarter, at 4.7 percent. Vontobel’s Bertschy said pet care was the main growth driver in the U.S., as it made up about 27 percent of sales in the country during the quarter.

The American confectionery unit, which Nestle has sold, still weighed on results in the quarter. The company has been wrestling with fast-changing preferences that include a shift to online sales and healthier snack options.

“A return to positive growth in the U.S. is encouraging,” James Targett, an analyst at Berenberg, wrote in a note.

In Asia, the timing of Chinese New Year supported revenue growth. Nestle reiterated its forecast for organic sales growth of 2 percent to 4 percent this year.

To contact the reporter on this story: Corinne Gretler in Zurich at cgretler1@bloomberg.net.

To contact the editors responsible for this story: Eric Pfanner at epfanner1@bloomberg.net, John J. Edwards III

©2018 Bloomberg L.P.