(Bloomberg) -- Remy Cointreau SA slashed its annual sales guidance on weak demand in the US and China as consumers continue to cut spending.
The French Cognac maker said that organic sales will fall by a double-digit percentage this year, after previously forecasting a gradual recovery, in a statement Friday. Organic sales in the second quarter ending September fell 16.1%, worse than estimates compiled by Bloomberg.
The shares fell as much as 3.6% in early trading and are down 48% to Thursday’s close.
Remy and other premium spirits makers have suffered a slowdown in demand for premium drinks such as Cognac, particularly in the US, after sales soared during the pandemic. Now retailers and wholesalers are using up inventory rather than placing fresh orders. There is also evidence that consumers have traded down, leading to heavy discounting.
Cognac producers, including Pernod Ricard, have also been affected by the government in China imposing temporary anti-dumping measures on brandy imports from the European Union. Sales of Cognac fell 20.7% on an organic basis during the period.
The company said the Asia Pacific region had suffered a decline in both Cognac and liqueurs and spirits, reflecting weaker consumer trends in China, where a slump in consumer spending has hit luxury spirits the hardest.
In an update to guidance, the Americas will not return to growth until the fourth quarter of this fiscal year at the earliest, while the Asia Pacific region will suffer a fall in sales in the second half, the company said. Profitability will also decline but will be partially offset by a €50 million ($54 million) cost-cutting plan.
It isn’t clear when the recovery would come, Jefferies analysts wrote in a note, though the cost-cutting plan was a positive.
Spirits executives are already under pressure from the US slowdown. The chief executive officer of Aperol maker Davide Campari-Milano, NV Matteo Fantacchiotti, left after speaking bearishly about the US market at a conference, leading the company to clarify that he was talking about sector trends, rather than individual performance.
(Updates with share move in third paragraph.)
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