Remy Cointreau braced investors on Thursday for a bigger than expected fall in annual sales, citing weakness in its key US market.
Inflation has hit demand in the US market, and potential tariffs could deal another blow to the spirits maker.
The French group is also being hit by a slowdown in China and said it expects global sales to decline by between 15% and 18% in its fiscal year, ending in March.
That is bigger than the 10.6% decline forecast in a London Stock Exchange Group (LSEG) consensus of analysts and follows a 19.2% drop in sales in the last fiscal year.
A Barclays analyst said in a note, “Doing business is becoming increasingly difficult for Remy.
“Remy is increasing its promotional activity… but sales of Remy Martin are still consistently declining.”
Cut Guidance
The maker of Remy Martin cognac and Cointreau liqueur has had to cut its guidance over the past year amid steep declines in cognac sales, causing its shares to tumble by around two thirds this year to their lowest level since 2016.
Its shares fell as much as 4% after its new guidance on Thursday.
In October, the drinks company abandoned hope for a sales recovery this year amid weak sales in the US in particular, where high interest rates and inflation have led stores to reduce spirits stock.
The group said cost cuts, which helped cushion the blow to first-half operating profit, would continue in the second half of the year.
Its first-half profit fell by 17.6% on an organic basis, versus a 20.6% decline expected by analysts.
US And China
Apart from US weakness, sales have also been slow in China due to a sluggish economy.
The US and Chinese markets drive the majority of cognac sales, which account for around 70% of Remy’s revenue.
Beijing has imposed steep tariffs on brandy from the European Union as part of tit-for-tat measures after the bloc voted for tariffs on Chinese-made electric vehicles.
Remy has already said it will hike prices to offset the impact.
Rival cognac maker Hennessey – owned by luxury goods firm LVMH – this week suspended a plan to bottle its brandy in China to avoid tariffs, after hundreds of workers went on strike to protest the move.
US president-elect Donald Trump threatened universal tariffs of 10% on foreign products would deliver a further blow to Remy’s US business.
Read More: Hennessy Suspends Plans To Bottle Cognac In China
