Pernod Ricard sales lower than expected

Pernod Ricard’s third quarter sales figures were lower than expected as its largest and third biggest markets in U.S. and China remained affected by global economic conditions with consumers resisting price rises and trading down the quality scale.

In the first three months of 2024 the group’s organic net sales were stable compared with the same period in 2023 but fell 2% in overall terms.

That takes the French group’s sales performance in the first nine months of its financial year to 6% below that of a year ago or 2% lower in organic terms.

Between January and the end of March sales volume grew by 1% but following four consecutive quarters of decline they are 4% lower for the nine months since last June compared with the previous comparable period.

Sales in the quarter were €2.35 billion, flat on a like-for-like basis versus analysts’ expectations of 2.9% growth.

Shares fall

The shares fell by 2.5% to €141.5 in Paris and have now lost 35% of their value in the past 12 months.

Nevertheless, Pernod Ricard described the sales figures “robust” and said they “illustrate the strength of our diversified portfolio of premium international spirits and our broad-based geographic footprint covering mature and emerging markets.”

With the “increased momentum that we’re experiencing in the rest of the world, with the exclusion of China and the US, we see that as pretty broad-based,” chairman and chief executive Alexandre Ricard said in an interview with Bloomberg.

Despite cutting its forecast for this year in February, Pernod has left unchanged its guidance of medium-term sales growth towards the top of its 4% to 7% range.

It predicts it organic profit from recurring operations will grow by 1% in the full year ending June 30, with an organic margin expansion.

Soft

It was hit by a “soft” Lunar New Year in China, when celebrations normally boost spirits sales.

In the quarter total sales in China fell by 12% (9% organically) where the economy is faltering on a housing investment crisis.

However, Pernod Ricard noted that Chinese consumers were spending strongly overseas, notably in Japan where the yen is weak, and that travel retail is fast picking up now that tourism is virtually back to pre-Covid levels.

In the United States, wholesalers and retailers are carefully restricting their stocks of premium drinks. In the quarter total sales were 11% lower or 8% down in organic terms.

India, however, was a bright spot as strong consumer demand boosted organic sales by 8% or 5% in total with good performances from Jameson’s Irish whiskey, Absolut vodka and Ther Glenlivet.

In the UK the sales figures were “soft” with demand for the group’s wines particularly weak.