Rémy Cointreau's shares rose 4.4% on Thursday even as it reported a steep decline in annual profit, with the French cognac maker predicting a recovery over the coming year.
The maker of Rémy Martin cognac and Cointreau liquor said its annual organic operating profit fell by 27.8% in the year ending March 31, compared to a 28.2% decline predicted by analysts.
It said this was helped by €145 million in cost savings, exceeding its target of €100 million.
Fall In Profits
The sharp profit fall was driven by an accompanying drop in sales, down 19.2% organically, as Rémy Cointreau faced difficulties throughout the year in its two key markets, the United States and China.
A tough economy dragged on cognac sales in China while elevated inventories in the United States weighed as sales came down from a post-COVID boom. Rémy Cointreau had hoped to bring its stock down to healthy levels by the end of the year.
However chief executive Eric Vallat told journalists that Rémy Cointreau's stock levels remained unchanged, though these might not be inappropriate if sales growth returns.
"Stocks that look high today will look very low tomorrow," he said, adding it remained unclear exactly when the situation in the United States will improve.
Price Optimisation
He added that Rémy Cointreau would continue to resist cutting prices or discounting. However, it would pursue an "optimisation" of pricing by state for its cheaper category of cognac, hardest hit by the decline, he said.
Rémy Cointreau predicted its sales would gradually improve over the course of next year, though issues in the U.S. and beyond would continue to weigh in the first half.
The guidance was "no worse than expected", Edward Mundy, analyst at Jefferies said, adding Rémy Cointreau's post-2025 commentary added reassurance it was confident in its performance longer-term.
The spirits company said progress towards its long-term targets, including high single-digit annual sales growth, will resume from 2025-26. Its board will propose a dividend of €2 per share, it added.
