French spirits maker Remy Cointreau posted a smaller-than-expected drop in third-quarter sales on Friday 27 January, as steep shipments to China ahead of the Lunar New Year partly offset lower cognac consumption in the United States.
Details
The maker of Remy Martin cognac and Cointreau liquor confirmed its full-year outlook for strong organic sales growth, albeit with further normalisation of consumption trends in the fourth quarter after two "outstanding years".
This echoed comments from the world's largest spirits maker Diageo, which on Thursday 26 January signalled that robust demand for its drinks as people made pricey cocktails at home during COVID-19 lockdowns may be slowing in some parts of the world, particularly North America.
Remy Cointreau reported a revenue of €437.6 million for the three months through December, an organic drop of 6% from a year earlier but slightly ahead of analysts' €433.3 million forecast.
Sales at its Remy Martin cognac division fell 11% in the quarter, dragged by a US slowdown even as the group's Chinese market continued to bounce back.
"Despite disruptions triggered by unprecedented levels of Covid, the group successfully generated robust sales growth ahead of the Chinese New Year and in anticipation of a full recovery in business," it said.
Additional Information
China, which accounts for 25% of the group's sales, earlier in January lifted its restrictive zero-COVID policy that included frequent testing, curbs on movement and mass lockdowns that heavily damaged the world's second-biggest economy.
UPDATE 2-Spirits Maker Remy Cointreau Sees Weak US Demand Deep Into 2023
The above news was followed by the following update -
Remy Cointreau said on Friday 27 January it expected US demand for cognac to weaken well into 2023, after the French spirits maker posted lower third-quarter sales as positive effects from the coronavirus pandemic fizzled out.
This echoed comments from the world's largest spirits maker Diageo on Thursday 26 January that robust demand for its drinks as people made pricey cocktails at home may be slowing in some parts of the world, particularly North America.
Sales of the Remy Martin cognac division fell 11% in the quarter against a tough 2021 comparison as high US consumption seen during lockdowns eased, leaving stores with fuller inventories.
"The level of inventories in the U.S. and market normalisation ... may raise questions about the near-term outlook for Remy," UBS analysts said in a note to clients.
Remy's shares, which shed a quarter of their value last year, were down more than 3% in midday trade.
The company expects US weakness to persist in the first half of the 2023/24 financial year, affected by "extremely high" comparisons, but a rebound should follow in the second half, finance chief Luca Marotta said in an earnings call.
To counter the slowdown, he said Remy planned to focus on the "very dynamic" Chinese market that is bouncing back after the country lifted its zero-COVID policy.
"The magnitude of (China's) reopening ... will be massive," Marotta said.
Third-quarter sales in China, which accounts for 25% of Remy's profits, were driven by a steep rise in shipments ahead of the Lunar New Year holiday.
The group's revenue fell 6% organically to €437.6 million in the third quarter, coming in slightly ahead of analysts' €433.3 million forecast.
The beat was helped by strong sales of Cointreau liquer and Bruichladdich whisky, Marotta said. The group still hopes to close the year to the end of March with strong organic sales growth.
Read More: Remy Cointreau Cautiously Optimistic On China Amid Lockdowns
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