France is expected to give Pernod Ricard a headache next week

France is expected to give Pernod Ricard a headache next week

Pernod Ricard is set to post a marked fall in sales from its domestic market, when it releases its Q3 sales next week, according to an analyst.

In a note to clients, issued earlier today (18 April), Investec Securities said that Pernod, which will announce its Q3 numbers on 26 April, should see sales in France in the period come in 76% down on the corresponding period a year earlier. The company's equity case is still seen as "compelling" by the analyst, which also highlighted the earlier timing of the Chinese New Year as providing a hurdle in the quarter.

“France will be very weak, given the H1 trade loading and the negative impact of tax driven price rises,” Investec said in the note.

The analyst cited Pernod as saying in its H1 results in February that trade loading by key French customers ahead of a 14% increase in excise tax on spirits in January contributed a one-off EUR98m (US$128.2m) revenue benefit in the six-month period. This would reverse in the third quarter, Pernod warned at the time.

The impact of the tax rise on consumer sentiment in calendar 2012 was quantified by Pernod at EUR25m, a third of which would fall in the second half of its fiscal FY. “As such,” said Investec, “we forecast a negative sales trend in Q3, and cumulatively -3% sales for FY 2012 in France.”

Despite the movement of Chinese New Year from 3 February in 2011 to 23 January this year, Investec said taht it still expects sales from the Asia region to increase by 9% in the quarter. The Americas should deliver a sales lift of 4%, “given decent Nielsen data in the US”, while Europe excluding France ought to see a 2% lift in sales.

"We don’t anticipate any changes to full year guidance, which we continue to view as modest relative to our forecasts," Investec concluded. Pernod is targeting a rise in FY organic profits from recurring operations "close to 8%".

Pernod's fiscal Q3 covers the first three months of calendar 2012.