French distiller Remy Cointreau SA reported first-quarter sales that missed analyst estimates as Chinese wholesalers continued to hold back on cognac orders.
Sales fell 9 percent on an organic basis in the three months through June, the Paris-based company said in a statement Tuesday. Analysts expected a 5.4 percent decline. The stock fell as much as 4 percent.
Under new Chief Executive Officer Valerie Chapoulaud-Floquet, the company has been changing distributors in China and pulling back from the lower-priced VS cognac category in the U.S., which is weighing on results. Asia has become less profitable for French distillers since the Chinese government began discouraging extravagant spending, denting the ultra-premium spirits market. The end of a champagne distribution contract also weighed on results.
The company had “a slower start to the year as Remy Cointreau was impacted by several technical effects that were already flagged by management in June but underestimated by the market,” said Raymond James analyst Hermine de Bentzmann in a note.
The stock fell 2.3 percent to 67.43 euros as of 10:26 a.m. in Paris.
Total revenue rose 3.9 percent to 223 million euros ($241 million), lower than the median estimate of 233 million euros.
Remy Cointreau said last month that it intends to become the global leader in spirits sold for $50 a bottle or more. That’s an $18 billion market which is growing at more than twice the pace of lower-priced alcohol.
The strategy is being met with short-term setbacks in Asia and the U.S. as consumers adapt to steeper prices, Nomura analyst Ian Shackleton said. China’s recent stock market rout has increased concern that consumer spending in the world’s most populous nation may weaken.
The company hasn’t seen any drop in demand in Asia associated to recent stock market volatility, Remy Chief Financial Officer Luca Marotta said on a conference call.
Remy Cointreau trades at a premium to competitors Diageo Plc and Pernod Ricard SA because it has greater potential to recover from the slowdown in Asia, Nomura’s Shackleton said.