Remy Cointreau’s (RCOP.PA) stock fell 11% on Friday after the company reduced its profit projection and sales outlook. As trade conditions in China and the U.S. deteriorated, hopes for a stronger second half began to wane.
Following sharp sales declines in the first half of the year, the manufacturer of Cointreau liqueurs and Remy Martin cognac had anticipated a rebound in the second half of the year.
Remy, however, postponed that recovery until its upcoming fiscal year on Friday, citing a “fiercely promotional” climate and the effect of rising interest rates on partners’ financing in the U.S. Another unexpected delay in China’s recovery is the weakening of demand by a challenging economy.
The business now projects a 15-20% decline in full-year organic revenues for 2023–2024, along with a “contained decrease” in its operating margin. Both had previously been predicted to be steady.
Chief Financial Officer Luca Marotta informed analysts that the firm will undergo a “harsh” change this year.
He stated, “It’s harsh, it hurts, and we are not happy,” but Remy’s plan was sound and more prepared to withstand hardship than in the past.
Marotta declared that Remy would not fight rivals on pricing, preferring to maintain profitability through a cost-cutting strategy to save 100 million euros ($106 million).
After falling 11%, the company’s shares gained some ground and were 10.4% down at 0857 GMT.
MAKERS OF SPIRITS SUFFER
The challenges in the U.S. are significant in the 30.1% decline in cognac sales in the first half of the year, which accounts for a substantial amount of Remy’s income.
Other spirits producers have also had a difficult time lately: LVMH (LVMH.PA) saw a slowdown in champagne sales; Pernod Ricard (PERP.PA) struggled with changes in U.S. inventories and a challenging climate in China; and Campari suffered from weakness in both the U.S. and China as well as bad weather in Europe.
Nonetheless, Remy anticipated further challenges, at least in the U.S., while Pernod and Campari anticipated better results in the upcoming quarter, which included the crucial Christmas season.
Remy’s outlook is now “materially below” expectations, according to Laurence Whyatt, director of Barclays’ European beverages research.
He said, “Remy has this double whammy coming from its two major markets,” noting that other businesses with a wider global reach and less emphasis on cognac would not be as badly hit.
Remy’s revenues for the year’s first half were 636.7 million euros, a 22.2% decrease and slightly less than analysts had predicted.
