French spirits group Rémy Cointreau said sales had declined 3% in the first quarter, reflecting the impact of well-flagged price increases and the termination of partner brand contracts in the Czech Republic, Slovakia and the United States.
Nevertheless, the maker of Rémy Martin cognac and Cointreau liquor expected sales growth to accelerate from the second quarter, and the company kept its full-year outlook.
CEO Departure
This comes as the group's chief executive Valerie Chapoulaud-Floquet, the architect of its push towards higher-priced spirits to drive profit margins, has announced she would step down by the end of 2019 for personal reasons.
Sales for the first quarter that ended in June reached 223.2 million euros ($250.77 million), representing a like-for-like decline of 3% from last year, which compared with analysts' expectations for a 2.5% decline.
This also compared to 7% like-for-like growth achieved in the fourth quarter of 2018.
Cognac Sales
Sales at Rémy Martin cognac, which makes over 80% of the company's profit, grew 5.5% like-for-like in the first quarter.
This was slightly above analysts' expectations for 4.4% growth but marked a slowdown from 7.9% growth in the fourth quarter of FY 2018/19.
It reflected the unfavourable impact of the phasing effects of price increases notably in the United States. The trend, however, remained favorable for cognac's highest qualities in Southeast Asian countries, Japan and Africa, the company said.
Rémy Cointreau has been focusing on selling spirits priced at $50 a bottle or more as part of a strategy that has benefited from a rebound in Chinese demand.
Rémy's Louis XIII luxury cognac - which sells for over $3,000 a bottle - has been in demand in China but in recent years has also benefited from growing demand from rich consumers elsewhere, especially in the United States.
Rémy said last month that its medium-term goal was to gradually drive current operating margin upwards.
Medium-Term Objectives
It reiterated on Thursday that its 2019-2020 financial year "would unfold within the framework of the group's medium-term objectives".
The group also reiterated that it expected the termination of contracts with partner brands to have an impact of 56 million euros on sales and 5 million euros on current operating profit in the current year.
Rémy Cointreau shares have gained 30% this year. Its stock market valuation is closer that of to luxury good companies, rather than food and drinks stocks.
Its shares trade at 32 times their 12-month forward earnings, compared to 22 times for Pernod Ricard and 24 times for Diageo.
News by Reuters, edited by ESM. Click subscribe to sign up to ESM: European Supermarket Magazine.
