(Bloomberg) -- Pernod Ricard SA reported weaker-than-expected sales for its latest quarter as lackluster demand in its top markets of China and the US persisted and consumers resisted shelling out on pricey booze.
Sales at the French spirits maker, whose brands include Absolut Vodka and Martell Cognac, dropped 5.9% on an organic basis to €2.78 billion ($3 billion) in the fiscal first quarter, slightly below analyst estimates of €2.84 billion.
Premium liquor producers are facing tepid demand in China amid a real estate crisis in the Asian country that has crimped sales.
Pernod Ricard expects sales in China this fiscal year to fall by more than last year’s 10% decline, Chief Executive Officer Alexandre Ricard said in an interview. “This is directly linked to very low consumer demand across all sectors, which is directly related to very low consumer confidence,” he said.
Pernod Ricard shares rose as much as 1% in early trading in Paris as the company kept its forecast for annual net sales growth. The stock has lost more than a fifth of its value this year.
Pernod and rivals, such as Remy Cointreau, have also been affected by China’s government imposing temporary anti-dumping measures on brandy imports from the European Union. The action by Beijing last week came after the EU decided to impose tariffs of as high as 45% on imports of Chinese electric vehicles for five years.
Pernod Ricard’s China sales dropped 26% during the period. The company said it’s taking actions to mitigate the effect of the anti-dumping moves there but did not provide further details. China’s economic woes are now impacting travel in Asia too, it added.
In the US, another key market, wary consumers are still curbing purchases of top notch spirits following a boom during the post pandemic era.
Pernod Ricard still expects to post net sales growth for this fiscal year. Volumes, which were flat in the quarter as prices fell, should also recover during its fiscal 2025 year, the company said.
“Pernod Ricard is in a perfect storm,” said Trevor Stirling, an analyst at Bernstein. “While we continue to believe the stock is significantly undervalued, we see no reason to trigger optimism in the short-term.”
--With assistance from Lisa Pham.
(Updates with CEO comments and share reaction beginning in paragraph four.)
©2024 Bloomberg L.P.