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Rémy Cointreau Shares Slide As Cognac Sales Boom Looks To Have Peaked

Shares in Rémy Cointreau slid more than 6% on Tuesday after the premium drinks maker indicated sales and profit growth would slow in the second half as consumption trends return to normal after two 'outstanding' years.

The group's cautious outlook overshadowed a better-than-expected 16.2% rise in second quarter sales, boosted by a recovery in demand for its top cognac brands in China during the Mid-Autumn festival late last month.

Strong Organic Sales 

The maker of Rémy Martin cognac and Cointreau liquor reiterated that for the full year 2022/23 it expected another year of strong organic sales growth and improving operating margins, helped by strict costs control and price increases to mitigate inflationary pressures.

Luca Marotta, finance chief, however, talked down full-year 2022/23 consensus expectations of organic sales and operating profit growth of 12.7% and 15.3%, telling analysts that previous expectations of 11.2% and 13.8% were "more the right ones".

By 0921 GMT, Rémy Cointreau shares were down 6.3% at €154.40, after falling nearly 8% at one point.

"Rémy Cointreau Q2 sales were solid and forex very positive but the second half outlook is tinged with caution," Bernstein analysts said in a note.

Like-For-Like Rise

Sales for the three months to 30 September came in at €457.2 million ($451.4 million), marking a like-for-like rise of 16.2% which beat analysts' expectations for 14.3% growth.

Cognac sales rose 15.6% to €345.9 million reflecting double-digit sales growth in China, with strong demand for Club and XO cognac during the Mid-Autumn festival in a market still impacted by stop and start COVID restrictions.

Cognac inventories were very low at the end of September in China and Marotta said the company was "reasonably bullish" on

China and did not see consumers in China or elsewhere down-trading because of economic conditions.

Remy Cointreau's fiscal year starts on 1 April and ends on 31 March.

Remy shares are down around 23% this year after rising 40% last year.

Higher-Priced Spirits 

The pandemic accelerated Rémy Cointreau's long-term drive towards higher-priced spirits to boost profit margins, speeding a shift towards premium drinks, cocktails and e-commerce as people drank more expensive drinks at home.

"Ideally positioned to take advantage of new consumption trends and buoyed by its advance on roll-out of its strategic plan, Remy Cointreau is looking to 2022/23 with confidence," the company said in a statement.

For the full year Rémy forecast a positive currency effect with reported sales now seen at €110-120 million compared with €90-100 million previously, and current operating profit at €55-60 million compared with €50-60 million.

News by Reuters, edited by Donna Ahern, Checkout. For more drinks stories click here. Click subscribe to sign up for the Checkout print edition.

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