Remy flags deeper than expected annual sales fall

By Dominique Vidalon and Emma Rumney

PARIS/LONDON (Reuters) -Remy Cointreau warned investors to lower their annual sales expectations for the third time in four months on Wednesday, flagging a “marked decline” in China and ongoing problems and tariff threats in the United States.

The French group also reported a smaller than expected decline in third-quarter sales thanks to a significantly better than projected performance in cognac, its core product.

The maker of Remy Martin cognac and Cointreau liquor stuck to its full-year guidance for a sales decline of between 15% and 18% but warned that it would be “close to” 18%, against analyst expectations of a 16.9% drop.

“Trends in the fourth quarter will be decisive,” it said in a statement.

In the midst of steep and persistent sales declines, Remy cut full-year guidance in October and warned in November of a deeper decline than investors had been expecting.

In the United States, high interest rates and inflation have led retailers and wholesalers to cut more expensive stock, such as Remy’s cognac, from inventories while competitors have cut prices sharply to forge ahead.

In China, growth has slowed in the face of a sluggish economy and low consumer confidence.

Remy warned of a “marked decline” in China and a further “strong drop” in its Americas division, consisting mostly of its U.S. business.

The U.S. and Chinese markets drive the majority of cognac sales, which account for about 70% of Remy’s revenue.

Despite this, Remy’s cognac sales fell far less than expected, down 22% on an organic basis against the 27% drop expected by analysts.

Shares in the company are likely to come under pressure as a result of its annual guidance, said Jefferies analyst Edward Mundy.

In addition, the company now faces tariffs in China and threat of U.S. levies, which could dent its businesses further.

($1 = 0.9579 euros)

(Reporting by Dominique VidalonEditing by Varun H K and David Goodman)