(News Bulletin 247) – The French spirits specialist confirms its roadmap for its entire 2023-2024 financial year despite a complicated start to the year. Rémy Cointeau is facing weaker demand in the United States, which is weighing on Cognac sales.

Mentioned for several quarters by Rémy Cointreau, the decline in cognac consumption in the United States is increasingly materializing in the activity of the spirits specialist. In this context, the publications of the French group are always eagerly awaited by the market.

As expected, Rémy Cointreau had a difficult start to the 2023-2024 financial year. Between April and June, the turnover of the group which owns the Rémy Martin or The Botanist brands fell by 37.2% in published data to 257.5 million euros, after 409.9 million euros in the first quarter 2022-2023.

“As announced, the start of the year is down sharply,” says TP ICAP Midcap in its note on Rémy Cointreau. The 35% organic drop in turnover is “in line with the expectations” of the design office, which was counting on a 36% drop as well as the consensus quoted by TP ICAP Midcap (-35.6%). For Stifel, the sales announced by Rémy Cointeau are also “in line” with its expectations.

A drop in consumption in the United States

This level of turnover is also in line with the expectations formulated by the group last June, during the publication of its annual results. Rémy Cointreau attributes this sharp decline in sales over the period to a “significant drop” in turnover in North America, in connection with an “exceptionally high comparison base” with the first quarter of 2022-23. Rémy Cointreau explains that in the United States, he has sharply reduced the level of his Cognac stocks, and has observed “a continued normalization of consumption” in this country, after a peak during the Covid period.

“Remy Martin’s volumes fell significantly by -55% but the company remained true to its value-oriented strategy with a price/mix up +10%,” recalls Stifel.

Conversely, the situation is much better outside the United States. Rémy Cointreau is delighted with the “very strong growth” achieved in the rest of the countries covered by the French group, particularly in China, in Southeast Asia and in Europe and the Middle East. This dynamic “was not however enough to compensate” the sharp drop in activity in the United States, wants to temper Stifel.

Renewed outlook for 2023-2024

This bad start could raise fears of a downward revision of Rémy Cointreau’s annual outlook. In the end, the company confirms its roadmap for the 2023-2024 financial year.

After a “record” year 2022-2023, the company is still counting on “stability” in its turnover for the current year, excluding scope and exchange rate effects. Rémy Cointreau also confirms that it anticipates a “marked decline” in its sales in the first half, due to a “very sharp drop in turnover in the United States and high bases of comparison”. The group only sees a “resumption of growth” in the second half “in the wake of a sharp rebound in activity in the United States” from the third quarter.

At the same time, the company anticipates strong growth in the rest of the world, supported by significant growth in China” as well as by “very good performance in the Europe-Middle East region” and the rest of Asia. Rémy Cointreau is also counting on a recovery in alcohol sales in airports (travel retail), to return to “a similar level of activity” to the 2019-2020 period.

For its part, TP ICAP Midcap gives a little more details and delivers its forecasts for Rémy Cointreau’s 2023-2024 financial year. The design office expects the French group to achieve a turnover of 1.493 billion euros, a level of sales which shows stable organic growth, and a drop of 3.35% in published data. The financial intermediary also indicates that its annual forecasts suggest a negative currency effect of 55 million euros, i.e. in the middle of the range communicated by Rémy Cointreau, which for its part forecasts a negative currency effect on its sales of between 50 and 60 million euros.

TP ICAP Midcap also anticipates current operating income of 406 million euros for 2023-2024, “suggesting an organic decline of 2% and a negative currency effect of 15 million euros”, and thus expects a current operating margin down 50 basis points (0.5%) to 27.2%.

“The timing for positioning yourself on the stock will be more appropriate after the publication of the results for the first half of the year (probably at the end of November 2023)”, believes Sarah Thirion, which does not prevent her from remaining positive on the long-term file. It thus reiterates its opinion on the purchase of Rémy Cointreau, with a target set at 219 euros.

On the Paris Stock Exchange, Rémy Cointreau is progressing after the confirmation of the 2023-2024 annual objectives. The action of the spirits group appreciated by 3.4% shortly before 10:40 a.m., to post one of the best performances of the SBF 120 index. And it dragged in its rise the other major spirits group, Pernod Ricard, which rose by 0.8%.