Remy Cointreau Drops After Cognac Maker Says Earnings Slumped

Barrels of Remy Martin Fine Champagne Cognac Sit in Cognac
An employee walks between barrels of Remy Martin Fine Champagne Cognac, laid to age in a cellar at the Remy Cointreau SA headquarters in Cognac. Photographer: Balint Porneczi/Bloomberg

Remy Cointreau SA fell the most in more than four months after the maker of Remy Martin cognac said fiscal full-year earnings slumped and reported sales that fell more than analysts anticipated on lower demand in China.

The stock fell as much as 6.6 percent, the steepest intraday decline since Nov. 26. Adjusted operating profit probably fell 35 percent to 40 percent in the 12 months through March, the company said today. Citigroup and UBS analysts had estimated a 33 percent decline.

Measures by Chinese President Xi Jinping’s government to restrain spending on gifts and banqueting have been weighing on sales of cognac in the country, particularly expensive blends. Remy said in January that it expected no relief from the Chinese New Year festival, a key gifting period, which occurred in the final three months of the fiscal year.

“Recent events in China are not a blip but instead mark a structural change in the market,” Jonathan Fyfe, an analyst at Mirabaud Securities LLP, wrote in a note to investors.

The stock traded 4.1 percent lower at 60.41 euros at 10:44 a.m. in Paris, where the company is based.

Sales Drop

Full-year sales slid 11 percent on an organic basis, which excludes acquisitions and currency shifts. Analysts expected a 9.7 percent decline, according to the median of nine estimates compiled by Bloomberg.

The company said it’s pursuing a “destocking effort against the backdrop of further stringent measures to restrict conspicuous consumption” in China. Organic revenue declined 16 percent in the fourth quarter as cognac sales plunged 32 percent.

Diageo Plc, the world’s biggest distiller, also said today that results were hurt by the Chinese government’s crackdown on sales of luxury liquor. Its shares fell as much as 5.1 percent in London trading. Pernod Ricard SA, the French maker of Martell cognac, fell as much as 3.6 percent in Paris.

Remy Cointreau had said it anticipated a “significant double-digit decline” in profit in the 12 months through March. The company is scheduled to report full-year earnings June 5.

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