Remy Sees No Relief to Cognac Pressure This Chinese New YearClementine Fletcher
Remy Cointreau SA said it expects the upcoming Chinese New Year, a key sales period for its Remy Martin cognac, to offer no relief to declining sales in Asia, sending the shares to their lowest since 2011.
Remy, whose cognac sales in the nine months through December fell 18 percent on a so-called organic basis, said today that an “unfavorable situation” for spirits in China didn’t improve in its third quarter. Seven analysts surveyed by Bloomberg News had estimated a 12 percent drop in cognac sales.
The maker of Cointreau and Mount Gay rum has suffered as China’s new government clamps down on extravagant spending. That’s led to declining sales of expensive cognac, used for toasts at lavish dinners and for gifting. Remy gets the largest proportion of its sales and profit from Remy Martin cognac.
The shares fell as much as 4.6 percent to 54.50 euros, the lowest since October 2011. The stock is down 9 percent so far this year, extending 2013’s 26 percent slump.
The Paris-based distiller reiterated its forecast for a “significant double-digit decline” in profit this year.
“The campaign to promote morality in China is expected to continue to adversely affect the consumption of ultra-premium products and no significant recovery can be expected due to the Chinese New Year,” Remy said in today’s statement. The festival, a key occasion for consumers to purchase expensive gifts of high-end cognac, is this year on Jan. 31.
Chief Executive Officer Frederic Pflanz said in November that annual earnings could fall 20 percent or possibly more. Finance Director Luca Marotta said today that the company would strictly control the prices of its products in China, and won’t bow to “short-term pressure” to cut them.
Pflanz stepped down as CEO for personal reasons and will take the role of development director, the company said Jan. 2. Remy named Chairman Francois Heriard Dubreuil as interim CEO.
Nine-month group organic sales slid 9.4 percent compared with a median estimate for a 4.7 percent decline, after falling 19 percent in the third quarter. Organic measures exclude the effect of acquisitions and currency fluctuations.