Rémy Cointreau sales down 19.2%

Despite a better-than-expected performance in the year to the end of March, Rémy Cointreau predicts its fortunes will improve only gradually over the next 12 months.

It was already known that the company had been hit by a sales slump as it faced difficulties throughout the year in its two prime markets, the United States and China.

Organic sales were 19.2% down in the year to March 31 but the financial background was not as bad as some feared.

Annual organic operating profit fell by 27.8% to €304.4 million (US$331 million) compared with a 28.2% decline predicted by analysts.

The smaller-than-expected profits fall sent the shares 4% ahead.

That is small consolation to investors who have seen the value of their holdings almost halved over the past 12 months. The results were aided €145 million ($158 million) in cost savings, easily exceeding the company’s target of €100 million.

Organic sales of Cognac were 33% lower than in the previous year, but Remy said this was still 26% ahead of 2019-20, the last full year before the outbreak of the coronavirus.

In China, where Rémy Martin is the sector leader, demand was hit by the sluggish economy, worsened by high youth unemployment and a housing debt crisis.

In the US sales suffered from the very high level of inventories caused by consumers turning away from Cognac and wholesalers reacting to high finance costs.

In addition, rival reacted by introducing fierce price competition, which Remy was unwilling to match to protect margins and its image.

Remy had hoped to reduce stocks to more sustainable levels by the spring, but chief executive Eric Vallat said they were unchanged.

He tried to look on the bright side by saying that higher stocks could be beneficial when sales pick up.

“Stocks that look high today will look very low tomorrow,” he said, but he was unable to predict exactly when demand in the United States will improve.

He was adamant that the group would continue to resist cutting prices or discounting.

But it would assess conditions in each state and undertake price “optimisation” for the cheaper category of cognac, which had been hardest.

Remy predicted its sales would gradually improve over the course of next year, though conditions in the US would continue to hold it back in the first half.

The company said it had made progress towards its long-term targets and that it remains ahead of its 2030 strategic plan.

It predicts that high single-digit annual sales growth will resume from 2025-26.