France's Pernod Ricard on Thursday forecast its sales will grow again next year even as challenges in the US and Chinese markets persist, after reporting an annual 1% drop largely in line with forecasts and its own guidance.
The world's No.2 Western spirits maker and its rivals have suffered as a post-pandemic boom in expensive spirits sales has reversed amid high interest rates, inflation and economic challenges in China, the number one market for alcoholic drinks.
Pricier Spirits
The maker of Absolut vodka and Jameson whiskey in particular has felt the pressure as retailers and wholesalers in the United States cut back on pricier spirits stock. In China, meanwhile, sales have also been slow as a troubled economy dented consumer confidence.
Full-year net sales declined by 9% and 10% in those markets respectively, and Pernod said it expected a 'soft' first quarter of 2025, with further US inventory adjustments and a 'very weak macro context in China'.
Elsewhere, however, it said it expected a good performance and that continued volume recovery would help bring net sales back into positive territory.
Volatile
"The key message is back to growth," Chairman and chief executive officer Alexandre Ricard told Reuters in an interview, adding that consumer sentiment remained volatile but was resilient in many markets.
Its shares rose in early trading to stand 1.63% higher at 0710 GMT.
Top spirits maker Diageo dragged shares across the sector down in July when it set a gloomy outlook for next year, saying it was difficult to call when the consumer environment and net sales would improve.
Higher Growth Rates
Both Diageo and Pernod, however, say they are confident they can ultimately return to far higher growth rates - ambitions some analysts see as overly optimistic given challenges facing the industry.
Ricard declined to be drawn on when Pernod may reach its goal of organic net sales growth closer to 7%, but said it was "not a long-term" time horizon.
Investors, such as Charles de Riedmatten, fund manager at Myria AM, however are also sceptical.
Credible Guidance
"I don't know why they stick to this," he said. De Riedmatten pointed out that Pernod rarely achieved such growth before the pandemic and lower, more credible guidance would boost shares long-term.
Pernod's 1% decline in 2024 organic net sales was just ahead of the 1.2% drop anticipated by analysts. Profit from recurring operations was well ahead of estimates, up 1.5%.
