The world’s biggest candy and coffee maker, Nestle, has hit a stumbling block. The company behind KitKat and Nespresso shocked investors on Thursday by slashing its sales forecast for the year.
The company posted a net profit of 5.644 billion Swiss francs ($6.09 billion), or 2.16 francs per share, for the first half of 2024 on Thursday.
In comparison, the profit was 5.649 billion francs, or 2.13 francs, per share in the same period last year.
Excluding one-time items, underlying earnings per share decreased 1% year-on-year to 2.40 francs. In constant currency, underlying earnings per share increased 3.3% to 2.51 francs.
Profit before taxes, associates, and joint ventures increased to 6.707 billion francs from 6.565 billion francs last year.
After years of riding high on inflation, the Swiss giant is now facing a bitter reality. Falling shop prices are eroding its profits. This unexpected downturn has forced Nestle to dial back its growth expectations from 4% to around 3%.
To combat rising costs, Nestle and its rivals had jacked up prices. But with inflation cooling down faster than anticipated, consumers are tightening their belts. The company has responded by moderating its price hikes, but it wasn’t enough to meet expectations.
While Nestle still managed to post a solid profit of over $8.8 billion for the first half, the news sent shockwaves through the market. Investors are now questioning the company’s ability to navigate these challenging economic waters.
