Remy released its H1 results last week

Remy released its H1 results last week

An analyst has said that Cognac is headed for a “dead-cat bounce” in the next six months as the current downward trends reverse into a slight upward blip.

But before companies such as Remy Cointreau, which saw its Remy Martin Cognac portfolio lose more sales in last week's first-half results, get too excited it's worth noting what the colourful metaphor means. A “dead-cat bounce” is a small, yet brief, recovery in a terminal drop - as in, even a dead cat will bounce if it falls from a great enough height.

The phrase was employed last week by analysts at Bernstein who hold a few concerns for the performance of Remy, which has been hit harder than most by anti-gifting measures in China. According to Bernstein's estimates, in Remy's fiscal 2013, 40% of operating profits came from Cognac in China. In fiscal 2014, that figure was down to 10%.

Thanks to the dead-cat bounce, however, Bernstein predicts Remy's final quarter of its fiscal year (from January to end of March) will recover slightly, allowing the company to post overall organic sales growth, a performance in line with Remy's own forecasts.

If that happens, then it will be also be thanks to Remy's Liquors & Spirits unit, which enjoyed a strong first half away from the gloom surrounding Cognac. Sales of its Greek spirit Metaxa grew by double-digits, while Scotch whisky unit Bruichladdich doubled its sales compared to last year, albeit from a small base.

However, Bernstein notes that Liquors & Spirits don't have the margins of Cognac and the analysts are warning investors they may find better value elsewhere in the stock market.

After all, a dead cat may bounce, but it remains very much dead.