Rémy Shares Sink On Worse Than Expected Q3
Published on Jan 24 2020 9:36 AM
Shares in French spirits group Rémy Cointreau sank after it posted a worse-than-expected 11.3% fall in third quarter like-for-like revenues and suspended its guidance due to the arrival of a new chief executive.
By 0805 GMT, Remy Cointreau shares were down 9% at €102.90.
Rémy Cointreau told investors on Friday they would have to wait until 4 June, when it releases its full-year earnings, to get an update on the group's strategy.
Demand for cognac in Hong Kong was impacted by protests in the region while slow stock replenishment in the United States, and changes in distribution contracts in Europe, also weighed on the third quarter.
These negative factors more than offset a robust performance in mainland China, where the Lunar New Year, a crucial moment for the drinks industry in that country, starts on 25 January.
This year's event will, however, take place amid rising concern about a coronavirus outbreak in the country which could also hurt sales of high-end brands exposed to China.
China, where Remy Cointreau makes an estimated 20% of its profits, is a key market for Rémy, along with the United States.
The group, which makes the Louis XIII luxury cognac that sells for over $2,000 a bottle, would be particularly vulnerable to a slowdown in China, analysts have said.
"There appears to be no change in underlying trends in mainland China, however the potential Coronavirus outbreak ahead of Chinese New Year creates near term uncertainty," Credit Suisse analysts said in a note.
Group sales reached €290.2 million ($322 million) in the three months to 31 December, showing a like-for-like decline of 11.3%. This compared with average expectations for a 6 percent decline in a company-compiled poll of 16 analysts.
Cognac sales alone fell 7.6%, worse than analysts' expectations for a 2.3% decline.
Guidance On Hold As New CEO Arrives
In December, Richemont's Eric Vallat replaced Valerie Chapoulaud-Floquet as Remy CEO. Chapoulaud-Floquet had been the architect of Rémy's push towards higher-priced spirits to drive profit margins.
The group's share price has more than doubled since Chapoulaud-Floquet, a luxury sector specialist, took over in September 2014 with a strategy focused on selling spirits priced at $50 or more a bottle. The strategy had also benefited from a rebound in Chinese demand.
The group said it had decided to hold off on previously provided annual and mid-term goals, but it was nevertheless confirming "the pertinence of its value strategy".
The publication of the annual 2019/20 results on June 4 will be the occasion to provide a new strategic roadmap, added Remy.