By Dominique Vidalon and Emma Rumney
PARIS/LONDON (Reuters) -Remy Cointreau slashed its full-year guidance on Friday, delaying its recovery from persistent double-digit sales declines, pushing out further a turnaround in the key U.S. market and flagging tougher conditions in China.
The maker of Remy Martin cognac and Cointreau liqueur has been grappling with sharp sales declines after enjoying booming growth following the COVID-19 pandemic.
It said it now expected another double-digit percentage fall in annual organic sales, following a 19.2% drop last year, rather than a gradual recovery led by the second half.
The warnings come as yet more bad news for the French company after Beijing’s decision to impose tariffs on European Union brandy imports into China.
Finance chief Luca Marotta said the impact would be marginal in its current financial year ending on March 31, and mitigation actions included price rises.
“We think that Q3 will be the toughest quarter,” the CFO said of group performance, adding there should at least be a U.S. rebound in the fourth quarter.
Beyond that, he said Remy expected a resumption of progress towards high single digit sales growth from its next financial year, with some improvement in profitability too.
Barclays analyst Laurence Whyatt, however, said investors would at some point need proof to believe things will improve after multiple setbacks.
“They have to print good numbers,” he said.
US, CHINA PROBLEMS
Remy shares were down 1.26% by 0922 GMT. They were already at their lowest since 2016.
The group has endured steep sales declines as retailers and wholesalers cut expensive spirits from their inventories while demand remained sluggish in China.
The U.S. and Chinese markets drive the majority of cognac sales, which account for around 70% of Remy’s revenues.
Remy now does not see a return to growth before the fourth quarter, despite Marotta flagging some positive signs.
It also joined rivals like Pernod Ricard and luxury giant LVMH, owner of Hennessy cognac, in blaming a tougher economy in China for worse-than-expected performance.
Its organic sales fell 16.1% in the second quarter, more than the 15.4% decline analysts had predicted. The company said it would launch a new cost-cutting plan worth 50 million euros ($54 million).
($1 = 0.9240 euros)
(Reporting by Dominique Vidalon, editing by Tassilo Hummel and Tomasz Janowski)
