Nestle cuts full-year guidance weeks after naming new CEO

Nestle shares fell as much as 2.3% in early Swiss trading, bringing the decline this year to about 16%.

Nestle SA cut its sales and profit guidance for the year as the Swiss foodmaker struggles to rebuild market share after higher prices turned consumers off branded products.

The maker of Nescafe coffee and Purina pet food now expects organic sales to rise around 2% in 2024, below the previous forecast of at least 3%, it said Thursday. Growth of 2% would be the lowest annual rate since at least the turn of the century.

Nestle shares fell as much as 2.3% in early Swiss trading, bringing the decline this year to about 16%.

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Nestle abruptly replaced Chief Executive Officer Mark Schneider with Laurent Freixe in September, shifting from an outsider who previously ran a health-care company to an insider who climbed the Swiss company’s executive ranks focusing on functions like marketing and selling.

Freixe is attempting to restore investor confidence after recent stumbles, including a previous cut to full-year sales guidance in July. On Thursday, he announced a raft of organizational changes, including a slimmed down and younger executive board and fewer geographical zones to speed decision making.

“This is clearly a very challenging update from Europe’s biggest consumer staples company,” Bernstein analysts said in a note, adding that it’s not immediately clear how the organizational rejig will expand market share or accelerate performance.

As part of Freixe’s overhaul, managers leading the push in using AI to manage its data from “farm to fork,” as well as sustainability, will report directly to the CEO, without sitting on the executive board.

Growth in North America was the weakest in the first nine months of the year, with sales contracting 0.3%. Meantime, high interest rates in Latin America mean shops are reducing how much inventory they want to hold, Chief Financial Officer Anna Manz said on a call with journalists.

Nestle also trimmed its full-year targets for underlying earnings per share and profitability. Underlying trading operating profit margin is now expected to be around 17%, rather than a modest improvement on last year’s 17.3%.

The company declined to comment on its 2025 targets of mid-single-digit organic growth and underlying trading operating profit margin of at least 17.5%. The outlook is expected to be tackled at an investor seminar on November 19.

Still, Freixe said the product portfolio is positioned to grow ahead of the food and beverage industry, led by pet food, nutrition and coffee.

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