Remy Cointreau toasts high-end Cognac as strategy pays off - Analysis 

When Remy Cointreau CEO Valérie Chapoulaud-Floquet set out her strategy for the firm in 2015, the intention was clear: Remy Cointreau will become a luxury goods retailer.

Yesterday, the company reported a 14% jump in fiscal-17 underlying operating profits as sales at the high-end continued to gather pace. The company said operating profit margins lifted by 3.7 percentage points in the 12 months to the end of March, thanks to the "excellent" performance of its over-EUR50 (US$56) products.

The results followed a sales update released in April, in which the company said its Remy Martin Cognac portfolio saw its organic sales in fiscal-2017 increase by 10%, thanks mainly to a 22.3% jump posted in the third quarter.

In a note following the results announcement, Societe Generale analyst Laurence Whyatt said the group had beaten market expectations. He said performance was "driven by impressive growth in high-end Cognacs, particularly Louis XIII". 

"This led to significant price/mix benefits and substantially better margins," he added. 

It comes as no surprise that growth came from Cognac's strongholds of the Americas and Asia Pacific. Within Asia Pacific, Whyatt flagged Greater China as seeing a "marked increase in private consumption during the second half of the financial year". 

Bryan, Garnier & Co analyst Virginie Roumage said China has been recovering strongly since September 2016, especially at the high-end. "The group's CEO said that the mid-Autumn festival was good but the Chinese New Year was excellent," she added. 

However, in the US, Roumage highlighted a slowing spirits market. "The CEO said that this slowdown, which was surprising given the good macro fundamentals, was due to people prioritising heavier investments such as houses or cars," Roumage said. "But the country is still growing in high single digits as Cognac and Irish whiskey are proving more resilient." 

Roumage said Remy has the best growth profile in the sector, thanks to its successful premiumisation strategy. "But," she said, "we see no further upside potential", downgrading the stock to neutral on valuation grounds. 

Remy Cointreau FY fiscal-2017 sales performance by brand - results data

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