(News Bulletin 247) – The spirits group saw its revenues plunge by 14.3% in the first quarter of its 2025-2026 financial year, a figure which rose to 7.6% excluding currency and scope effects. But the market expected this poor performance. Furthermore, the financial director sent a message of confidence during the conference call.

Along with automotive equipment manufacturers, spirits remain the major sector which has experienced a real descent into stock market hell in recent years. The changes over three years in the prices of the big names in the sector, such as the British Diageo (-51.4%), the French Rémy Cointreau (-72%) or Pernod Ricard (-52.5%), attest to this.

The sector has suffered the full brunt of the post-Covid euphoria. Stocks piled up, consumption, particularly in China, weakened, and sales of spirits groups plunged.

In a recent note at the end of September, Bank of America was less than enthusiastic, warning that the recovery “would take longer.”

“The spirits sector in the United States has seen a steady decline of 3% to 4% this year (excluding prepared cocktails) and our recent virtual field trip confirmed that the recovery could still take time. The situation is also difficult in the rest of the world (the third quarter could mark the trough for China, but the recovery will be very gradual, Europe remains sluggish, pressures on consumer purchasing power are unlikely to ease in the near future). Soon, growth in India will likely be below normal this year and Latin America could slow down,” the bank said.

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“Meh”

The turnover delivered by Pernod Ricard for the first quarter of its 2025-2026 financial year (a period which runs from July to the end of September) bears the scars of these difficulties.

The revenues of the owner of the Jameson, Martell, Malibu, Absolut, Chivas and Pastis 51 brands fell by 14.3% year-on-year in published data, to 2.384 billion euros.

Pernod Ricard, however, suffered from heavy unfavorable exchange rate effects (143 million euros) as well as from the drop in its scope (54 million euros), linked to the sale of its international wine activities.

On a comparable basis, the fall in revenue stands at 7.6% over one year. In the United States, Pernod claims to have noticed an improvement in “sell-out” (sales from distributors to consumers). But its activity remains weighed down by inventory adjustments. Its sales fell by 16% like-for-like in the country over the quarter.

Inventory adjustments also penalized activity in China, where Pernod Ricard also faced an unfavorable economic context “for consumer morale and demand”, explains the company.

In India, the company’s momentum was hampered by the change in excise duties (taxes levied on certain products such as tobacco and alcohol) in one state, namely Maharashtra.

Furthermore, Martell cognacs only recently began to resume activity in Chinese airports. The benefit of this recovery is only expected in the second quarter. Which explains the 15% drop in the “Global travel retail” division.

Cognac sales had previously been suspended pending the resolution of the “anti-dumping” investigation into European spirits by Beijing. China finally introduced customs duties of 34.9% in July but provided exemptions for groups that agreed to sell at a minimum import price. This allowed European companies to get away with it at lower costs.

Barclays speaks of “a disappointing start to the financial year”. According to data cited by the British establishment, the consensus (the average forecast of analysts) anticipated an overall drop in revenues of 6.8% on a comparable basis and of 14% in the United States, a little less than the figures published by the company.

“Meh”, title for its part Royal Bank of Canada (an interjection that can be translated as “meh” in French) in a note published this Thursday morning.

Engaging comments for the second half

Despite these discouraging figures, Pernod’s share price is far from being down on its luck this Thursday, October 16.

The stock gained 2.2% around 4:20 p.m. and gained up to 4.2% during the session.

Let us first point out that the market is not really taken by surprise. The management of Pernod Ricard had warned, at the end of last August, that its first half and especially its first quarter would be difficult.

“The elements behind the decline in Q1 25/26 turnover were known although in certain key areas (Europe and the United States), the declines were slightly more negative,” observes Oddo BHF.

Above all, financial director Helene de Tisso succeeded in her grand oral presentation in front of analysts, giving reasons for hope during the conference call which began at 9 a.m. this Wednesday.

“This was reassuring, all things considered. The financial director reaffirmed the catalysts in view of the expected return to growth in the second half of the year, this is what is generating interest in the stock, as for Diageo,” explains an analyst.

The Alphavalue research firm, for its part, emphasizes that the manager “delivered a constructive message for the second half, emphasizing that with greater clarity on customs duties and the conclusion of the anti-dumping investigation, the company expects a gradual normalization from the second quarter”.

During this call, the financial director gave several elements allowing us to count on a rebound in activity in the second half of the company’s financial year.

The resumption of Martell sales in “duty free” stores, an “easier” basis of comparison in China, is one of the elements cited by Hélène de Tissot.

The manager also mentioned “the dynamic trajectory” of activity in India, which will be less hampered by tax changes, as well as lesser impacts of inventory adjustments in the United States, combined with continued improvement in “sell out”.

In its note published Thursday morning, Barclays, however, sent a warning of a potential runaway.

“Given the number of false starts seen in this sector in recent years, investors will likely wait for more concrete signs of improvement before investing in this company and industry,” she warned.