(Bloomberg) -- Remy Cointreau SA forecast a drop in annual sales that was bigger than investors expected, hurt by a weak recovery in the US.
The French Cognac maker expects organic sales to decline by as much as 18% in the current fiscal year ending in March. This compares with the 11.8% analysts expected, according to estimates compiled by Bloomberg.
Shares of Remy fell as much as 5% in early trading. The stock is down more than 48% in the past 12 months.
Remy said it’s having to cope with a “fiercely promotional” environment in the US and the recovery there has been much slower than the company originally anticipated.
Unlike some rivals, Remy has resisted lowering prices to protect its margins but it’s cutting costs to counteract the downturn in the US, which is now unlikely to recover until the end of the current year, the company said Thursday.
“We are witnessing some encouraging signs of recovery in the US, or at least of stabilization,” Chief Executive Officer Eric Vallat said on a media call, adding that the company will begin making marketing investments.
Cognac producers, including rival Pernod Ricard, have also been affected by China’s temporary anti-dumping measures on brandy imported from the European Union. Remy said while the impact of additional duties in China will be “marginal” for its current financial year, it will kick off an action plan to mitigate the effects beginning next year.
Trump Tariff Threat
The potential threat of the tariffs in the US under a Donald Trump administration is less of a concern than the potential hit the company faces in China, said Vallat.
“10% is not going to kill us for sure,” Vallat said in reference to Trump’s mooted universal tariff on all imports to the US.
Investors are going to need confidence that Remy’s earnings downgrade cycle is complete and that the company’s strategy to invest in the second half will allow it to exit the downcycle stronger, said Edward Mundy, an analyst at Jefferies.
(Updates with shares and analyst comment starting from third paragraph. A previous version corrected the size of sales fall in lead.)
©2024 Bloomberg L.P.