Rémy Cointreau has lowered its full-year sales outlook after another quarter of double-digit declines, prompting the liquor group to launch more cost-savings measures.
The family-owned business has introduced a €50m ($54.1m) plan to reduce costs as sales deteriorated again across its business regions, led by the Americas, one of Rémy Cointreau’s largest markets.
Second-quarter group sales fell 16.1% in organic terms, the Rémy Martin Cognac brand owner reported today (25 October). The drop in Cognac sales was more pronounced at 20.7%, while other liqueurs and spirits within the portfolio decreased 4.9%.
Consequently, Rémy Cointreau has adjusted its sales guidance for the 2024-25 fiscal year to a “double-digit” decline, compared with its previous outlook for a “gradual recovery over the course of the year”.
“In this worsening economic environment, Rémy Cointreau remains determined to protect, as much as possible, its current operating margin (in organic terms), through continued tight cost controls and implementation of a new cost-cutting plan,” the listed company said.
The France-based group said the plan will help to “offset” what it now expects to be a “deterioration” in its operating profit margin over the course of the year on an organic basis.
Previously, the Cognac, rum and whisky maker had pledged to take efforts toward the “protection of profitability” in terms of the margin.
Through the first half, Rémy Cointreau said it saw a “strong drop” (22.8%) in organic sales in the Americas business region due to “destocking” by retailers.
APAC sales fell 8%, impacted by the continuation of a “tough” market environment in China. The Europe, Middle East and Africa (EMEA) region witnessed a “slight improvement”, despite an 18.8% decline in sales.
Group-wise, sales decreased 15.9% over the six months to €533.7m in organic terms and were down 16.2% on a reported basis.
The results prompted Rémy Cointreau to adjust its assumptions for the rest of the year by individual regions, citing a “persistent lack of visibility on the timing of a recovery in the United States, combined with "worsening market conditions in China”.
Rémy Cointreau said it does not expect to return to growth in the Americas before the fourth quarter, “at the earliest”.
And through the back half, the business envisages a “sequential sales deterioration” in APAC and “continued subdued consumer trends” in the EMEA region.
Meanwhile, Rémy Cointreau played down the potential impact from China’s imposition of what amounts to import tariffs on brandy, albeit “provisional”, which are perceived as a retaliation to the EU’s plan to put similar taxes on Chinese electric vehicles.
“If this decision is confirmed, the impact would be marginal for the 2024-25 fiscal year, and the group would activate its action plan to mitigate the effects from 2025-26.”
Analysts as US investment bank Stifel wrote: “The overall Cognac outlook is not improving materially, as constructive expectations for the US in the back-end of the fiscal year (March quarter) are offset by a bearish view on the Chinese market.
“In a soft overall spirits market, Cognac is amongst the most challenging categories, especially after China's recent hike on import taxes.”
Rémy Cointreau added that the current financial year will be one of “transition”, hopefully geared toward the end of destocking in the Americas as it retained the longer-term outlook for 2029-30.
Namely, a gross margin of 72% and an operating margin of 33%, “based on 2019-20 consolidated scope and exchange rates”.
