By Dominique Vidalon and Emma Rumney
PARIS/LONDON (Reuters) -French spirits group Remy Cointreau on Wednesday flagged a “steep recovery” in the critical U.S. market that has dragged on performance for over a year, sending its shares up more than 5% even as its fourth-quarter sales missed forecasts.
The maker of Remy Martin cognac and Cointreau liqueur has been grappling with problems in both the U.S. and China, which account for most of its cognac sales, sending its shares downwards in recent years.
Remy also faces steep tariffs in China as part of a Beijing-Brussels trade dispute, which has also seen duty-free sales of cognac in China halted. In the U.S., tariffs affecting its cognac are currently on pause.
Sales in the U.S. had spiralled due to high inflation and interest rates, and Remy said in January that the fourth quarter was the earliest possible timing for a U.S. recovery.
However, Americas cognac sales, driven by the U.S., had “rebounded sharply” in the period, Remy said, citing a “very favourable” comparison base. Cognac sales in the region declined significantly last year.
An action plan for the cheapest version of Remy Martin cognac – the most popular in the U.S. – was having a positive impact, it continued.
There were emerging reasons to be optimistic on Remy, said James Sym, partner at Goodhart Partners LLP, which manages a fund that holds Remy stock, adding he was moving towards building his position.
“I feel that we’re getting to the bottom of a very cheap share,” he said.
Remy finance chief Luca Marotta told investors on a call that the company’s plans to mitigate U.S. tariffs did not, to his knowledge, include shifting any operations to the United States.
Its plans instead included changes to how it purchases eau-de-vie brandy or builds inventories, he continued.
The U.S. news contrasted with a sharper-than-expected fourth quarter fall in overall sales and cognac sales, which account for 70% of Remy’s business.
The period may mark the last full quarter for CEO Eric Vallat, whose resignation was announced earlier in April, effective this summer.
The company said it still expects to resume progress towards targeted high single-digit sales growth from next year, though Marotta said there would be more clarity in the coming months on whether guidance changes are needed.
Rivals Diageo and Pernod have both either cut or withdrawn longer term sales targets deemed overly ambitious by some investors.
($1 = 0.8791 euros)
(Reporting by Dominique Vidalon in Paris and Emma Rumney in London; Editing by Sudip Kar-Gupta, Kim Coghill and Jan Harvey)
