Pernod Ricard Sales Miss Estimates Amid Chinese Destocking

Pernod Ricard SA, the maker of Absolut vodka, reported third-quarter revenue that missed estimates as destocking in China continued to weigh on shipments and as a later Easter delayed sales in Europe.

Sales on an organic basis were unchanged in the three months through March, the Paris-based company said today, compared with the 1.4 percent growth analysts expected, according to the median of 13 estimates compiled by Bloomberg. Revenue in the period totaled 1.62 billion euros ($2.2 billion). Nine-month organic sales also showed no growth.

“The headline miss is unhelpful but the big driver of that seems to be technical effects in Europe,” Jonathan Fyfe, an analyst at Mirabaud in London, wrote in an e-mail. “It is also reassuring to note that management feel able to reiterate full-year guidance and Asia ex-China shows good momentum.”

Pernod has been hit by the government crackdown on extravagant spending in China, reducing sales of pricey brands such as Martell cognac. Distillers including Pernod and London-based competitor Diageo Plc have been expanding in emerging markets in recent years to capture growth as European sales stagnate due to low consumer confidence and increasing competition.

Regional Performance

European sales fell 3 percent because of the later Easter and after last year’s third quarter included heavy French purchasing ahead of a tax increase, Pernod said. Sales at the Asia-Rest of World unit fell 1 percent as tough trading conditions in Thailand and South Korea weighed on performance, though the company had a “very good performance” in India and travel retail.

Sales in the Americas, which include the U.S., the world’s most profitable market, rose 5 percent, helped by Brazil. The company said today it bought Kenwood Vineyards in California from F. Korbel & Bros. to expand in premium wines. The French company already owns brands such as Jacob’s Creek of Australia and Spain’s Campo Viejo.

Pernod’s shares fell as much as 0.8 percent and were down 0.6 percent at 85.12 euros at 9:03 a.m. in Paris trading. The stock has declined 12 percent in the past year.

“In an environment that remains challenging, our performance over the nine months was in line with the half-year and with our annual guidance,” Chief Executive Officer Pierre Pringuet said in the statement. Pernod reiterated a forecast for annual profit to grow 1 percent to 3 percent on an organic basis, which excludes acquisitions, disposals and currency swings.

Remy Cointreau SA, the maker of Remy Martin cognac, said April 17 that full-year earnings fell as much as 40 percent as sales declined more than anticipated on Chinese cutbacks. That spurred concerns from analysts including Fyfe at Mirabaud in London that more restrained spending on alcohol for gifts and feasts marks a structural change in the market.

Before it's here, it's on the Bloomberg Terminal.