Shares in Remy Cointreau ended the day up more than 15% after the French spirits group outlined signs its recent woes in the Cognac market had not worsened.
The Rémy Martin maker’s shares closed at €101.25, up 15.16% on the day, clawing back some of the lost ground seen in the last 12 months.
Over the last year, Rémy Cointreau’s shares are down more than 39%, hit by declining sales of Cognac, which accounts for 64% of the business’ sales.
Today’s upturn came despite the company, which also owns Cointreau liqueurs and Mount Gay rum, forecasting its full-year sales will fall “at the lower end” of an already stated guidance range of a decline of 15-20%. The group cut its sales target for the 2023/24 financial year in October.
Rémy Cointreau said its sales stood at €956.6m in the first nine months of its fiscal year, down 22.7% on an organic basis. Third-quarter sales from Cognac slid by more than a third organically.
However, on a call with analysts, CFO Luca Marotta indicated the company was seeing signs its faltering Cognac business was stabilising in the category’s two major markets of China and the US.
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He also said there had been no impact on its sales in China from Beijing’s move to launch an investigation into the EU over complaints it has been dumping brandy.
Analysts at AllianceBernstein described the sales update as “very weak but no worse than expected”. In a note to clients, they added: “The US Cognac market is showing some signs of improvement in the published data and Rémy Cointreau’s rate of decline is slowing but it is still too early to call the bottom.”
Rémy Cointreau said an “intense promotional environment and ongoing inventory reductions” affected its Cognac business in the US. Depletions “improved sequentially but continued to lag expectations”.
At the end of December, the company had five months’ worth of inventories across its portfolio due to depletions still being lower year on year.
Marotta said: “US depletions, they’re getting better, they’re improving, but they’re still negative, which means that inventories are still too high in terms of days of coverage.”
In China, the company moved to reduce its level of inventories ahead of Chinese New Year. Cognac sales in China fell at a “very strong double-digit” rate in Rémy Cointreau’s third quarter, the company said in its results statement. The value of Cognac depletions in China declined at a “mid-single-digit” in the first nine months of the group’s fiscal year, the company said but rose at a “low-single-digit” rate in the third quarter.
“Overall, value depletions were down mid-single-digit in the nine months but slightly up in the Q3,” Marotta said. “As a result, at the end of the nine months, our level of inventory is still slightly high but much lower compared to the end of Q2.”
Asked by an analyst if Rémy Cointreau would look to invest further in other markets in the face of the challenges it is seeing in the US and China, Marotta said: “We are investing in other markets, clearly GTR, some Asian countries, some European countries, it can be also part of the Americas. “We are not giving up and switching the attention totally from China and the US. We still need to unlock, to invest in the US, clearly in China, to grab more depletions.”