(News Bulletin 247) – The spirits giant’s sales disappointed investors in the third quarter, due to a drop in its revenues in these two strategic markets. Pernod Ricard is counting on an improvement in its activity over the last part of its staggered 2023-2024 financial year.

On this day marked by a deluge of publications, Pernod Ricard missed its meeting with the market, just like Dassault Systèmes or the mass distribution giant Carrefour.

The world number two in spirits revealed disappointing sales for the third quarter of its staggered 2023-2024 financial year. Remember that the spirits giant is now the only member of the CAC 40 which is on a staggered financial year, with accounts closed at the end of June.

On the Paris Stock Exchange, Pernod Ricard shares lost 2.3% around 4:00 p.m., dragging down its competitor Rémy Cointreau (-1.1%).

Again this quarter, Pernod Ricard sold less alcohol in China and the United States in a context of normalization of consumption in these two countries after two years of exceptional growth.

Less alcohol in the United States and China

Across the Atlantic, the company’s revenues in this region declined by 11%, which was “broadly in line” due to continued destocking. In China, Pernod Ricard’s other key market, sales fell by 10% on a like-for-like basis, ‘due to a deleterious consumer environment which continues to weigh on performance in the country,’ specifies Oddo BHF.

Sales performed better in Pernod Ricard’s other markets. In India, the group revealed growth of 8%, with “strong consumer demand for spirits”, and “continued progression in premiumization (upmarket) trends”. In Global Travel Retail, i.e. sales at airports, sales jumped 38% in the third quarter, driven among other things by a “gradual recovery of Chinese travelers”.

Thus, between January and the end of March, the group which owns the Absolut vodka brands, Ricard pastis, Ballantine’s scotch whiskeys and Mumm champagne saw its turnover decline by 1.8% in published data, for ‘establish at 2.347 billion euros.

The level of billings announced by Pernod Ricard turns out to be below the consensus cited by Oddo BHF, since analysts anticipated revenues of 2.428 billion euros for the French group. In comparable data, the drop is limited to 0.5%, but this is enough to disappoint the markets which were hoping for an increase of 2.2% according to the consensus cited by the research office.

“While most geographic areas are on the decline, it is important to note that in the third quarter of 2023/2024, Pernod Ricard recorded an increase in its volumes of 1% after the latter fell sharply during the normalization period. “, nevertheless points out Oddo BHF.

The research office observes “a sequential improvement in the group’s operational performance, but still no tangible return to growth”.

Doubts about the end of the year

Concerning its outlook, the world number two in the spirits sector expects to achieve “dynamic turnover for the fourth quarter, an improvement compared to the first nine months”. This authorizes it to reiterate an objective of “generally stable” organic sales growth for its 2023-2024 financial year. This objective “is based on a strong hypothesis” warns Oddo BHF, and underlies that Pernod Ricard will have to “record organic growth of 4% to 8%” in the fourth quarter.

An opinion which is also shared by analysts at Morgan Stanley. “Given the continued weakness in market conditions, a good performance in the fourth quarter is still necessary to achieve an overall stable turnover,” warns the research office.

The group also expects current operating income to grow by around 1% on a comparable basis, whereas it previously anticipated internal growth in the “low single digits”.

Despite a difficult context, the world number two in wines and spirits has confirmed its medium-term objectives, as announced in June 2022. The company expects annual organic growth in its turnover in the “part high” of a range between 4% and 7% in the medium term.

Once this target is reached, the group expects an improvement in the operating margin of around 0.5/0.6 percentage points per year. Pernod Ricard is also banking on the launch of its digital platform “Convivality Platform” to accelerate the growth of its high-end brands.