French spirits group Rémy Cointreau delivered stronger-than-expected third quarter revenues, as the early timing of the Chinese New Year boosted premium cognac sales while demand was also robust in the United States.
The Chinese New Year, a crucial part of the calendar for the drinks industry in that country, starts on 5 February this year as opposed to 16 February last year.
Rémy said this earlier start had helped cognac sales in the third quarter in Asia Pacific, and added that cognac sales were growing at double-digit rates across all regions.
Sales
Group sales reached €348 million in the three months to 31 December, showing like-for-like growth of 8.7%. This compared with average expectations of 8.2% growth in a company-compiled poll of 16 analysts.
Rémy, which is trying to sell more of its higher-priced spirits to boost profits, also kept its goal for growth in current operating profit at constant exchange rates and scope for the full year ending 31 March.
Finance chief Luca Marotta said in November he was "OK" with market estimates for a 13.5% rise in full-year 2018/19 current operating profit at constant exchange rates and scope.
Cognac sales alone grew 15.6% like-for-like in the quarter, accelerating from 12% growth in the second quarter, and beating analysts' expectations of 13.3%.
Rémy Cointreau said the earlier timing of the Chinese New Year lifted its Asia Pacific sales by four million euros in the third quarter.
China Slowdown
Nevertheless, global financial markets have been volatile in the wake of data showing a slowdown in China, which is the world's second-biggest economy.
There is also concern over trade tensions between Beijing and Washington and a knock-on effect on Chinese consumers, whose appetite for branded goods has supported a rebound in the global luxury industry over the past two years.
Rémy Cointreau, which makes the Louis XIII luxury cognac that sells for over $2,000 a bottle, would be particularly vulnerable to a slowdown in China, analysts have said.
The group has focused on selling spirits priced at $50 a bottle or more as part of a strategy that has benefited from a rebound in Chinese demand as well as solid sales in the United States, its top market.
Rémy Cointreau shares, which fell 14% last year, have risen 4% so far in 2019. The stock trades at a forward price to earnings ratio of 36.60, at a similar multiple to luxury stocks such as Hermes.
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