Remy Cointreau shares wobble despite more Cognac sales gains

Remy Cointreau shares wobble despite more Cognac sales gains

Remy Cointreau's share price sank after the group reported an 18% rise in nine-month net sales today, showing that even Cognac's seemingly inexorable rise in China has its limits.

Remy Cointreau can hardly have missed its Champagne business since offloading it to privately-held EPI at the end of its last fiscal year. Cognac sales in China have continued apace, rising by 30% in the nine months to the end of December. Demand linked to Chinese New Year propelled Remy Martin brand sales up by 55% in the third quarter.

I've talked before about the potential risk of being so reliant on one product in one market, so I won't bore you again with my doomsaying here. For now, however, there is no apparent need to, with China continuing to suck up premium Cognac as fast as the spirit's namesake enclave in south-west France can churn it out. 

From a look at Remy's performance on the Paris stock market, however, it looks as though some people have got a bit giddy on the alcohol fumes. For example, in the past year, Remy Cointreau's share price has strongly outperformed that of Pernod Ricard, hardly a slouch when it comes to Chinese Cognac sales and which also has a far broader portfolio of heavyweight brands.

After announcing its sales figures today, Remy's share price fell by around 4% and has settled into a decline of around 2.5% for the day so far. At the root of this investor concern seems to be Remy's warning that net sales will probably decline in its fourth quarter.

What was that? But, yes, essentially, because of the different timing of Chinese New Year, Remy does not believe it will scale the heights of the previous year's final three months. 

Full-year sales and operating profits are still set for strong gains, according to the firm. Today's results statement is impressive, of course, but perhaps it also offers a little lesson in perspective.