Pernod Ricard’s shares rose 6% on Thursday, even as the company cut its full-year sales forecast after expected improvements failed to materialise.
The spirits maker cut its forecast and share buyback programme when hoped-for improvements in the United States and China did not come to fruition.
As a result, the company now expects its full-year sales to flatline after previous growth forecasts.
The world’s second-largest spirits maker, after Diageo, expects to buy back €300 million worth of shares for the year. This is down from the previously expected €500-800 million.
However, the company said it was confident about the second half of the fiscal year.
US and China
Chief executive Alexandre Ricard said, “Four months ahead of the end of the financial year we have a little bit more visibility on how we can end.”
Pernod Ricard had been banking on improvements in two of their biggest markets, the US and China.
However, retailers in the US continued to cut expensive spirits after high interest rates increased the cost of holding them.
In China, a tough economy impacted consumer demand ahead of Lunar New Year – a key holiday for spirit sales.
The company saw steep declines in the first-half net sales in the US and China, which fell by 7% and 9% respectively.
All but two of its key strategic international brands were in negative global territory.
Alexandre Richard said that US inventories were so tight at the moment, products were at risk of going out of stock.
He added that in China, the company is yet to see any impact on trading from an anti-dumping probe into EU brandies such as cognac.
Trough Of Performance
An analyst at Jefferies Edward Mundy said there was growing conviction that Pernod Ricard was reaching the trough of its performance.
He added that the shares were inexpensive given the spirit makers medium-term potential.
Pernod Ricard maintained its medium-term guidance of 4% to 7% top line growth, despite fears this could be cut.
Overall, half-year sales matched analysts’ expectation, falling 3%.
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