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Monday 24 September 2018

PZ Cussons warns over profits as high inflation erodes consumer confidence

British households have faced a sustained squeeze on their spending power from a jump in the cost of living and paltry wage growth.

PZ Cussons has warned over profits (PZ Cussons/PA)
PZ Cussons has warned over profits (PZ Cussons/PA)

By Ravender Sembhy, Press Association City Editor

Imperial Leather owner PZ Cussons has warned over profits as consumer confidence dives in the UK and the firm faces tough trading in Nigeria.

Earlier this year the group said that Brexit-fuelled inflation was encouraging shoppers to swap brand name soaps for discounted rivals.

On Thursday PZ Cussons warned that this will result in full-year profit falling “short of expectations”, with the board pencilling in a range between £80 million to £85 million.

“The UK washing and bathing division has continued to experience lower levels of purchases, reflecting consumer caution across all retail channels caused by economic uncertainty and inflation outstripping wage growth,” the firm said.

“Whilst new product launches have been well received, they have not had the desired uplift in sales to compensate for the wider volume and margin shortfall.”

PZ Cussons shares took a hammering following the announcement, falling 25% to 207.6p.

British households have faced a sustained squeeze on their spending power from a jump in the cost of living and paltry wage growth.

PZ Cussons, which also owns St Tropez sun tan lotion and Original Source shower gel, is now embarking on a number of initiatives to get back on track.

These include a reassessment of its operating model to further reduce overheads, a review of product costs with a focus on areas such as packaging reduction and a review of its milk business in Nigeria with an objective of returning it to profitability.

A key plank will be re-prioritisation of the group’s new product pipeline to focus on “fewer, bigger projects requiring lower levels of complexity”.

At its interim results in January, PZ Cussons saw adjusted pre-tax profits slide 15% to £34 million in the six months ending in November, driven largely by tough UK trading conditions as shoppers tightened their belts.

While margins were squeezed across Europe and Africa, Asia helped soften the blow thanks to strong trading in Australia and Indonesia.

Press Association

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