Rémy Cointreau shares slide after forecast cut and sales miss

Investing.com -- Rémy Cointreau's (EPA:RCOP ) shares were down on Friday after the company cut its full-year outlook and reported weaker-than-expected second-quarter results, reflecting continued challenges across its key markets. 

At 4:18 am (0818 GMT), Rémy Cointreau was trading 1.7% lower at €58.65.

The company revised its guidance downward, warning of another year of double-digit organic sales declines, walking back previous expectations of a gradual recovery in fiscal 2025. 

The company  now projects a turnaround in the Americas no sooner than the fourth quarter and predicts a further decline in sales across Asia for the second half. Weak consumer trends in Europe are also expected to persist, adding to the pressure.

The French spirits maker posted a 16.1% decline in organic sales for the second quarter, missing consensus estimates of a 15.4% drop.

Total reported sales for the quarter came in at €316.7 million, slightly above the consensus forecast of €316 million but still highlighting a difficult environment. 

First-half organic sales are now down 15.9%, following a 15.6% decline in the first quarter, signaling persistent headwinds across the business.

“The combination of these factors means we expect HSD/LDD consensus FY25E EPS cuts today,” said analysts from Citi Research in a note. 

Rémy Cointreau's profitability is forecast to contract, although the company outlined a cost-cutting initiative worth more than €50 million to offset some of the damage. 

This shift contrasts with earlier promises to preserve profitability by maintaining elevated advertising and promotional spending. 

Analysts at Jefferies noted the company's previous efforts to “protect profitability” are giving way to more defensive measures amid worsening market conditions.

The U.S. market continues to struggle with inventory destocking, as wholesalers work through excess stock accumulated during the pandemic.

While the pace of depletion — a measure of product leaving distribution channels — improved slightly in the second quarter compared to the first, it remained weaker than expected. 

In China, sales saw some resilience thanks to 10% growth in e-commerce, but the broader market is still grappling with economic uncertainty and challenging year-over-year comparisons. 

Anti-dumping tariffs on whisky, set to impact fiscal 2025, are expected to be minimal, with mitigation strategies planned for the following year.

“As such, the full impact of these new measures will not be felt until FY26E. The group will of course “activate its action plan” to mitigate these effects but we fear cumulative FY26E consensus EPS downgrades of -20%-plus are possible today,” Citi said.

Category-wise, Cognac underperformed expectations with a 17.5% decline, missing forecasts of a 15.9% drop, while liqueurs and spirits offered a rare bright spot. 

Sales in that segment fell 12%, beating both consensus and Jefferies' expectations of steeper declines. However, partner brands struggled, reporting a 25% decline, well below analyst projections.

The company cautioned that sales could weaken further in the back half of the year, compounding the challenges already visible in the first six months. 

Source: Investing.com