PARIS (Reuters) – Pernod Ricard reported third quarter sales on Thursday that were stable on an organic basis but below expectations, penalized by a slowdown in China and the United States.

The spirits group posted a turnover of 2.35 billion euros over the quarter, compared to 2.39 billion for the same period last year – a stable organic result while analysts expected growth of 2.9%.

On the Paris Stock Exchange, Pernod Ricard shares fell 3.21% to 140.40 euros at 09:29 GMT.

Demand in China was weak during the crucial Lunar New Year period amid tough economic conditions, while retailers continued to adjust inventories in the United States, the company said in a statement.

Chinese demand is worrying investors in several sectors, from retail to luxury, while the world’s second largest economy has not rebounded as expected after the Covid-19 crisis.

In the United States, wholesalers and retailers have continued to reduce inventories of expensive spirits as sales fall away from post-pandemic peaks, Pernod Ricard said.

However, the group says it is now counting on “dynamic” turnover in the fourth quarter to achieve generally stable organic turnover over the entire 2023/24 financial year.

It is also targeting growth in its current operating profit of around 1% for the annual financial year, with an internal increase in the current operating margin.

The group, explained financial director Hélène de Tissot, will benefit from favorable comparison bases in the fourth quarter and also expects an acceleration in the growth of its sales.

This acceleration is already underway in certain markets, she continued, citing India as an example, where sales increased by 8% in the third quarter.

Activity fell by 12% in China and 11% in the United States in the third quarter and the difficult conditions in these two countries are expected to continue, added the financial director.

The problems in the United States will continue into the fourth quarter and into the company’s next fiscal year as inventory clearances are now occurring more at the wholesale level.

Pernod Ricard also declared itself confident in its medium-term objectives. He anticipates revenue growth at the high end of the range of between 4% and 7% and current operating margin expansion of 50 to 60 basis points.

The group’s fiscal year begins July 1.

(Report by Dominique Vidalon, written by Kate Entringer, edited by Blandine Hénault and Sophie Louet)

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