Nestlé Shares Soar on Sales Rebound, Plan to Shed 16,000 Jobs

(Bloomberg) -- Nestlé SA shares surged after the foodmaker posted a stronger-than-expected increase in quarterly sales and announced plans to slash 16,000 jobs, just weeks after replacing its chief executive officer.

The stock climbed as much as 8.2% in early Swiss trading, the biggest gain since 2008. The foodmaker had risen 1.7% this year through Wednesday, lagging behind the Swiss Market Index.

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The job reductions, amounting to about 6% of the workforce, will occur over the next two years, the maker of Nespresso coffee capsules and KitKat candy bars said Thursday. Nestlé raised its target for cost savings to 3 billion Swiss francs ($3.7 billion) by the end of 2027, from 2.5 billion francs.

“The world is changing, and Nestlé needs to change faster,” CEO Philipp Navratil said in a statement Thursday. “This will include making hard but necessary decisions to reduce headcount.”

The announcement on jobs came alongside a 4.3% rise in third-quarter sales, driven by higher prices and improved real internal growth — a key measure of volumes closely watched by analysts and investors.

“Although still very fragile, we believe that this set of results will help Nestlé partly restore investors’ trust,” said Jean-Philippe Bertschy, an analyst at Vontobel.

Nestlé tapped Navratil as CEO last month after ousting his predecessor Laurent Freixe a year into his tenure for allegedly hiding a romantic relationship with a subordinate. In the wake of the scandal, Chairman Paul Bulcke stepped down earlier than scheduled, replaced by former Inditex SA CEO Pablo Isla.

A Nestlé veteran of more than 20 years who most recently ran the Nespresso business, Navratil has indicated he’ll maintain Freixe’s strategy of boosting spending on advertising, betting on fewer but bigger product initiatives and getting rid of underperforming units.

On a call with reporters Thursday, he identified Nestlé’s top priority as further increasing real internal growth, and added the company is evaluating everything in its portfolio.

Welcome ‘Ambition’

“We welcome Navratil’s ambition to foster a culture that does not accept losing market share and where winning is rewarded, which sounds more assertive than before,” said James Edwardes Jones, an analyst at RBC Capital Markets.

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Jones added that the beat on real internal growth in the quarter was important as this has been the biggest area of concern for investors.

Navratil’s predecessor had begun a restructuring that included the potential sale of struggling vitamin brands and finding a potential partner for Nestlé’s bottled water business, which Freixe separated into a standalone unit.

Any job losses through divestments won’t be counted toward the 16,000 planned reductions, Navratil told reporters on a call.

(Releads on shares)

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