French spirits maker Pernod Ricard on Thursday said it expected higher sales this year despite a tough first quarter, painting a positive picture for both China and the United States which helped lift its shares by over 5%.
Pernod, the world's second largest spirits maker by sales, had already flagged a decline in first quarter sales. These fell 2% overall, led by 8% drops in the United States and China, two critical markets for the company.
Positive Outlook
In China, an economic slowdown dampened demand, while inventory adjustments in the United States and normalising sales after a post-COVID surge hurt Pernod.
But the maker of Absolut Vodka, Martell cognac and Mumm champagne said it had a positive outlook for both nations for the full-year, as well as its other two "must-win" markets: India and global travel retail.
Pernod had seen signs of improvement in Chinese consumption in September, with cognac demand stabilising, Chief financial officer Helene de Tissot told analysts, adding that while it was too early to say if this trend would last it had been confirmed so far in October.
Easing Inflation
There was also a "very clear pick-up in weddings and banquets", boding well for the all-important Chinese New Year celebration in February, she added.
In the United States, the inventory impacts that dented Pernod's performance would be largely contained to the first quarter, she said.
Cost Control
Pernod said it was confident it could deliver sales growth over its 2024 financial year, with easing inflationary pressures and cost control also helping margin expansion.
It reported sales of €3.04 billion from July to September, a like-for-like decline of 2% - slightly better than analyst expectations.
Big Uncertainty
"The big uncertainty is just around China," Bernstein analyst Trevor Stirling said of Pernod's outlook.
While the company's sales would likely grow compared to some even weaker quarters last year, when COVID-19 was still a factor, he said it was unclear to what degree the economic factors hurting Pernod's current performance will improve.
Pernod shares were up 5.39% at 0828 GMT.
