Remy Cointreau sees slow return to growth as US slump eases

Remy is among the cognac makers to have been hit with allegations of dumping French brandy in China, where authorities have opened an investigation.

Remy Cointreau will take another year to return to growth following a sharp downturn in the key US market and disruption in its China business.

The French maker of Remy Martin cognac said the current fiscal year would be one of transition, before it gets back on track to hitting a longer-term goal of achieving high single-digit annual growth in sales.

Remy shares rose as much as 5.8% in early Paris trading after operating income for the year came in slightly above analysts’ estimates and the company stuck with its long-term targets. The stock had lost 40% in the past year as conditions in the US market worsened.

The guidance “provides a degree of reassurance around the company’s confidence in long-term trends,” analysts from Jefferies wrote in a note.

Sales fell 19% on an organic basis for the year ended in March as Remy reduced inventory in the US, where it has been hit by inflation, intense competition and a return to pre-pandemic drinking habits.

Chief executive Eric Vallat said the recovery in the US had taken longer than expected, but profitability was still the third-best in the company’s history. The business would not benefit from selling more at lower prices, he added.

“We are well equipped to hang on,” Mr Vallat said on a call with reporters. “It would help short term to go for promotions, definitely, but this we would pay for long after.” 

While cognac sales in China and in travel hubs have started to recover, it has not been enough to offset the slowdown in the US. The company said its cost-cutting drive saved €145m, above its €100m target.

Remy is among the cognac makers to have been hit with allegations of dumping French brandy in China, where authorities have opened an investigation. The move came after the EU began a probe last year into China’s electric vehicle subsidies. China accounts for almost a quarter of the cognac industry’s total exports.

Bloomberg