Pernod Ricard reported worse than expected third quarter sales as its big U.S. and Chinese businesses remained under heavy pressure, leaving its full-year forecast resting on an uptick in demand over the next few months.
Consumers have been cutting back on expensive spirits in the world's top two economies, and Pernod Ricard, which makes Martell cognac and Absolut vodka, had been hoping trends would improve following a cut to its full-year forecast in February.
But the world's No.2 western-style spirits maker pointed to a "soft" Lunar New Year in China, when huge celebrations normally boost spirits sales.
Investors in sectors from drinks to luxury goods are fretting about Chinese demand as the economy sputters.
In the United States, wholesalers and retailers continued to cut pricey booze from their inventories as sales come off extraordinary highs seen after COVID-19, Pernod Ricard said.
Full-Year Guidance
It left its full-year guidance unchanged, betting 'dynamic' fourth quarter sales could help deliver its guidance for a broadly stable annual performance.
Pernod Ricard's sales stood at €2.35 billion in the three months ended March 31 – flat on a like-for-like basis versus analysts' expectations of 2.9% growth.
In China, sales slumped 12% during the third quarter and U.S. sales declined 11%. In India, however, strong consumer demand boosted sales by 8%.
'Tough Quarter'
But all regions lagged expectations in "another tough quarter" for the company, RBC Capital Markets analyst James Edwardes Jones, said.
Pernod Ricard predicted organic profit from recurring operations to grow by 1% in the full year ending June 30, with an organic margin expansion.
It said it was still aiming to achieve medium-term sales growth towards the top of its 4% to 7% range.
