Pernod Ricard is not expecting to see an immediate hit from US tariffs, with China still expected to weigh on its on full-year results.
When asked by a Bank of America analyst this morning (17 April) whether the French spirits giant would be “quite shielded from the impact” of tariffs in its fourth quarter – which ends in June – and that there would not be “a material impact in the US”, CFO Hélène de Tissot replied: “Yes, exactly.”
She added: “For the fiscal year ’25, the main impact of tariffs is China, which we are completely assessing. That’s why we are confirming our ability and our confidence to sustain the operating margin.”
In its third-quarter results released today, the Martell Cognac maker saw net sales grow 2% in the US but decline 5% year-to-date. Net sales in China dropped 5% in Q3 but slid 22% year-to-date in a “macro context” that “remains challenging", Pernod said.
The company described the US spirits market as “broadly stable” in its results announcement, adding organic net sales in the quarter were ahead of sell-out, aided by wholesaler orders in advance of the tariff announcements.
The Jameson distiller booked €2.38bn ($2.7bn) in total third-quarter net sales, declining 3% on an organic and reported basis.
Nine-month net sales also dipped 4% organically and 3% in reported terms to €8.5bn, hit by a €145m foreign exchange impact. Volumes in the nine months were up 1%.
Speaking on the investor call, de Tissot still warned “it's a bit difficult to be extremely... prescriptive on what to expect” from US tariffs, adding the “situation is quite serious”.
“The inventory might continue to be impacted by the tariff uncertainty but, as far as portfolio brands [are] concerned, in terms of performance expected for Q4, we are, as you know, continuously closing that gap to market. It’s quite visible in the past three months' numbers, so we expect that continue to happen in Q4.”
In a note to clients this morning, Barclays analysts said: “These results reinforce our view that the market is being too optimistic around USA and China sales, and also profits once the impacts of announced tariffs are considered.”
The Código brand owner also saw a significant slump in global travel retail sales, with third-quarter net sales dropping 31%, while year-to-date net sales slid 17%.
These were attributed to the suspended duty-free sales for Cognac in China and “a high comparison base in Q3”.
In February, following the early release of Pernod's first-half results, de Tissot highlighted a “worsening situation” in China linked to the “technical suspension of the duty-free regime impacting travel retail [in] Asia. To be more specific, China duty free and Cognac in China duty free”.
Last month, reports from Bloomberg and Reuters suggested China had postponed the conclusion of its anti-dumping investigation into EU brandy products.
France’s Foreign Minister Jean-Noël Barrot told journalists during a trip to China the completion of the probe had been delayed three months.
“This measure should give us a few months’ breathing space with the reopening of duty-free sales of Cognac and Armagnac, which represent a significant volume of sales for some brands,” he said in emailed comments to Bloomberg.
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