Remy abandons hopes for sales recovery as problems mount
Remy Cointreau expects double-digit sales decline for 2024/25
Beijing's tariffs on EU brandy imports add to challenges
Announces 50 million euro cost-cutting plan
Adds share price reaction, paragraph 4
By Dominique Vidalon and Emma Rumney
PARIS/LONDON, Oct 25 (Reuters) -Remy Cointreau RCOP.PA slashed its full-year guidance on Friday, delaying its recovery from persistent double-digit sales declines, pushing out further a turnaround in the key U.S. market and flagging deepening problems in Europe and Asia.
The maker of Remy Martin cognac and Cointreau liqueur enjoyed booming growth after the COVID-19 pandemic as consumers splashed out on expensive spirits, only to suffer a dramatic reversal in fortunes as economies worsened in recent years.
It said it now expected another double-digit percentage fall in organic sales for 2024-2025 financial year, following a 19.2% drop last year, rather than a gradual recovery led by the second half. This would also impact its profit margin.
Its shares fell 3.6% in early trade, but quickly recovered ground to trade 0.92% down by 0804 GMT. They were already at their lowest since 2016.
The warnings come as yet more bad news for the French company after Beijing's decision to impose tariffs on European Union brandy imports into China. The company said the impact would be marginal for this year ending on March 31, and it would "activate its plan to mitigate the effects from 2025-26".
"2024-25 will be a year of transition," Remy's statement said. The company said it still expected to continue progress towards high-single digit annual sales growth from its next financial year.
Remy has already endured steep declines in sales in the United States, where high interest rates and concerns about its economic outlook have prompted retailers and wholesalers to cut expensive spirits inventories.
It makes some 70% of sales from cognac, with the vast majority of those in the U.S. and Chinese markets.
Remy said the United States would now not return to growth before the fourth quarter. It had been expecting improved U.S. performance to drive a better second half.
It flagged a tougher market in China, where a slow economy has hit demand, and a sharper sales fall elsewhere in Asia. An 18.8% decline in Europe, Middle East and Africa compounded problems.
The company said it would launch a new cost-cutting plan worth 50 million euros ($54 million).
Its organic sales fell 16.1% in the second quarter, more than the 15.4% decline analysts had predicted.
Rivals Pernod Ricard PERP.PA and luxury giant LVMH LVMH.PA, owner of Hennessy cognac, both also recently missed their forecasts amid a tougher economy in China.
($1 = 0.9240 euros)
Reporting by Dominique Vidalon, editing by Tassilo Hummel and Tomasz Janowski
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