Haleon plc (HLN) shares experienced a notable decline in extended-hours trading after Barclays downgraded the consumer healthcare company's rating from "Overweight" to "Equal-Weight," citing persistent challenges in its key U.S. market. The downgrade reflects concerns over slower category growth and inventory destocking, prompting a re-evaluation of the company's near-term growth trajectory.

Haleon plc Shares Decline Following Barclays Downgrade Amid U.S. Market Weakness

Haleon plc (HLN), the consumer healthcare giant, saw its shares decline in extended-hours trading on September 16, 2025, following a significant downgrade from Barclays. The financial institution lowered its rating on HLN from "Overweight" to "Equal-Weight," signaling a more cautious outlook for the stock.

The Event in Detail

Barclays revised its recommendation for Haleon plc on Tuesday, September 16, 2025, moving the stock from an "Overweight" to an "Equal-Weight" rating. Concurrently, the firm reduced its price target for Haleon shares from 430p to 380p. In response, HLN experienced a 4.18% decline in extended-hours trading, settling at $9.40 per share, down from its closing price of $9.68.

The rationale behind Barclays' downgrade centered on "prolonged weakness" in the United States market, which constitutes approximately 34% of Haleon's total revenue. The firm also highlighted "fresh headwinds" emerging in Latin America and Europe. Barclays analysts noted that the U.S. business is under strain from decelerated category growth and substantial destocking, particularly within drugstores, which reportedly hold nearly twice the inventory levels of mass retailers. Furthermore, Barclays projected Haleon's 2025 organic sales growth at 3.1%, falling below the company's own lowered guidance of around 3.5%.

Analysis of Market Reaction

The immediate share price decline for Haleon underscores the market's sensitivity to downgrades from major financial institutions like Barclays. The move reflects increased investor apprehension regarding Haleon's ability to achieve its sales growth targets amid a challenging retail and consumer environment. This recent downgrade follows a period of heightened scrutiny after Haleon lowered its guidance in July, just one month after reaffirming a previous sales growth target, which had already negatively impacted investor sentiment.

However, the overall market sentiment for HLN appears mixed. While Barclays adopted a more conservative stance, the average one-year price target for HLN remains $11.82 per share, indicating a potential upside of 22.14% from its recent closing price. Additionally, Haleon holds a consensus "Moderate Buy" rating from analysts, with four buy ratings and four hold ratings, and no sell ratings. This divergence is further exemplified by Goldman Sachs previously upgrading Haleon to "Buy" and Berenberg maintaining a "Buy" rating with a target of $13.41. Conversely, institutional investors such as Dodge & Cox and Wellington Management Group Llp significantly reduced their holdings in HLN during the last quarter, signaling some large-scale divestment.

Broader Context and Implications

Haleon plc, with a market capitalization exceeding $43 billion, is a prominent global player in consumer healthcare, recognized for brands like Sensodyne, Centrum, and Advil. The company's performance in the U.S. is crucial, and NielsenIQ data revealed Haleon's U.S. sales growth slipped to -2.6% in August, lagging the broader declining market, which was down 2.2%.

From a valuation perspective, Haleon currently trades at 19.4 times its forecast 2025 earnings. This represents a 5% discount relative to the European staples sector but a premium compared to direct rivals such as Reckitt and Kenvue. Analysts have questioned the justification for a premium over companies like Unilever, which has demonstrated more consistent U.S. growth. Despite these concerns, Haleon has shown resilience in other areas, reporting a 160-basis-point gross margin expansion in the first half of 2025 and identifying £800 million in cost savings slated for between 2026 and 2030. The company also projects earnings growth of 13.95% in the coming year, from $0.43 to $0.49 per share, and maintains a stable dividend yield of 1.79% with a prudent payout ratio of 37.76%.

Expert Commentary

Barclays analysts emphasized the challenging environment Haleon faces, stating:

"The issue is that it is trying to make this adjustment in a period of huge consumer pressure and an unprecedented level of channel shift, especially in the U.S."

Haleon CEO Brian McNamara acknowledged the inventory situation, noting:

"We have very good visibility on inventory… They tend to hold higher inventory levels. We are not seeing those numbers swing higher. The risk is, inventories go lower, and then it results in out of stocks in the store."

Barclays analysts concluded that it is "50/50 whether it can hold its 3.5% FY OSG guide," reflecting the uncertainty surrounding Haleon's near-term growth prospects.

Looking Ahead

Investors will be closely monitoring Haleon's efforts to navigate the evolving retail landscape and address inventory challenges in its largest market, the U.S. The effectiveness of the company's cost-saving initiatives and its ability to counter pricing pressures in Europe will be crucial indicators. Upcoming earnings reports and any revisions to guidance from Haleon are expected to significantly influence stock performance. The diverging opinions among analysts suggest that Haleon shares may continue to experience volatility as the market awaits clearer signals of a sustainable turnaround and consistent growth acceleration in its key segments.