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French spirit maker Rémy Cointreau has slashed growth expectations after posting a double-digit drop in organic sales in its second quarter amid a slowdown of sales in the US.
The group posted consolidated sales of €636.7m in the first half of 2023-2024, down 22.2% on an organic basis.
On a reported basis, the decline was 26.6%, including a negative currency effect of 4.4% due primarily to the renminbi and the US dollar.
In the Americas, sales fell a steep 49.9% on an organic basis in the first half, due to continued destocking and sharp normalisation of consumption in a tough market.
In APAC, sales rose a strong 16.6%, driven by China and Southeast Asia, along with a recovery in travel retail.
Finally, EMEA reported good resilience, with sales up 8.9%.
However, first-half sales at the cognac division fell 30.1% on an organic basis, due primarily to a steep decline in North America where the group is targeting a reduction in its inventories, and facing a normalisation of consumption and an intense promotional environment.
In this context, the group said its decision to maintain its value-driven strategy through a firm pricing policy contributed to “increased short-term pressure” on volume.
As anticipated, the liqueurs & spirits division returned to growth in the second quarter (up 12.1% on an organic basis) to report steady sales for the first half (up 0.1% on an organic basis). the Americas saw a steep rise in sales in the second quarter, led by solid momentum in Cointreau, Bruichladdich and The Botanist.
The weak sales performance and “worsening market conditions”, particulary in the US, has seen the group cut its 23/24 financial forecasts.
In the US, the rebound in sales initially expected for the third quarter is now anticipated in fiscal 2024-25. Meanwhile, in APAC, the group expects growth in sales, but at a pace below initial forecasts given the slower than anticipated post-Covid economic recovery in China.
Additionally, in the EMEA region, the group expects more moderate annual growth in a persistently inflationary context.
As a result, Rémy Cointreau has adjusted its full-year 2023-24 objectives and now expects a decline between 15% and 20% in sales on an organic basis, down from stable.
It also guided to a contained organic decrease in COP margin (against stable previously) thanks to deployment of a major cost-cutting plan.
The group’s shares have fallen 7.9% on the news back to €108.60.
Morning update
On the markets this morning, the FTSE 100 is up 0.1% to 7,361.1pts after some more early losses.
Risers include Naked Wines, up 2.3% to 45p, Bakkavor, up 1.6% to 87.2p and Premier Foods, up 1.6% to 116.6p.
Fallers include C&C Group, down 2.2% to 131.4p, THG, down 2.2% to 60.7p and PayPoint, down 1.5% to 515p.
Yesteday in the City
The FTSE 100 fell back 0.8% yesterday to end trading at 7,354.5pts
Unilever dropped 2.8% to 113.5p after posting a fall in third quarter volumes and its new strategic plan underwhelming the City.
Also falling was C&C Group, down 3.6% to 134.4p after its first half results continued to be impacted by distribution logistics issues.
Other fallers were B&M European Value Retail, down 5% to 526p, Deliveroo, down 4.4% to 118.2p, PZ Cussons, down 4% to 125.6p, Kerry Group, down 3.5% to €73.00 and Fever-Tree, down 3.5% to 1,0003p.
The day’s risers included Ocado, up 5.9% to 487.1p, Naked Wines, up 2.3% to 44p. Compass Group, up 1.4% to 2,075p, DS Smith, up 1.2% to 272.2p and Sainsbury’s, up 1.1% to 255p.
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