Remy Cointreau Braces for Sales Slump Amid US, China Challenges
Thursday, Nov 28, 2024 5:17 am ET
4min read Luxury spirits giant Remy Cointreau is bracing for a significant sales slump in the face of persistent challenges in its key markets, the US and China. The company, renowned for its Remy Martin cognac and Cointreau liqueur, has seen its shares plummet to their lowest levels since 2016 amidst declining sales and worsening market conditions.
Remy Cointreau's first-half results, announced earlier this month, offered a glimpse of the headwinds the company is facing. Operating profit fell by 17.6% to €147.3m, narrowly beating analyst expectations of a 20.6% decline. However, sales suffered a steep decline of 15.9% to €533.7m, as demand remained sluggish in the US and China, its two largest markets.
The US and China account for around 70% of Remy Cointreau's cognac sales, which in turn make up about 70% of the company's revenue. The US, in particular, has been a challenging market, with retailers and wholesalers cutting expensive spirits inventories due to high interest rates and economic concerns.
Meanwhile, China's slowing economy and anti-dumping tariffs on cognac imports have further compounded Remy Cointreau's woes. In response to these challenges, the company has cut around €50m in costs this year, with a significant portion coming from marketing and communications.
Remy Cointreau CEO Eric Vallat has acknowledged the company's difficulties, stating that 2024-25 would be "a year of transition" before a resumption of growth. The company has predicted organic sales will decline between 15% and 18% in the full year, with an operating profit margin of between 21% and 22% on an organic basis.
To mitigate the impact of these tariffs and economic slowdowns, Remy Cointreau has announced plans to raise prices and reintroduce targeted marketing in the US and China. The company is also banking on a recovery in the US market, although CEO Eric Vallat has cautioned that this may not happen until the fourth quarter.
Investors will be watching Remy Cointreau closely in the coming months as it navigates these challenging market conditions. The company's ability to weather the storm will depend on its strategic cost-cutting measures, targeted marketing efforts, and the resilience of its premium brand portfolio.
Remy Cointreau's first-half results, announced earlier this month, offered a glimpse of the headwinds the company is facing. Operating profit fell by 17.6% to €147.3m, narrowly beating analyst expectations of a 20.6% decline. However, sales suffered a steep decline of 15.9% to €533.7m, as demand remained sluggish in the US and China, its two largest markets.
The US and China account for around 70% of Remy Cointreau's cognac sales, which in turn make up about 70% of the company's revenue. The US, in particular, has been a challenging market, with retailers and wholesalers cutting expensive spirits inventories due to high interest rates and economic concerns.
Meanwhile, China's slowing economy and anti-dumping tariffs on cognac imports have further compounded Remy Cointreau's woes. In response to these challenges, the company has cut around €50m in costs this year, with a significant portion coming from marketing and communications.
Remy Cointreau CEO Eric Vallat has acknowledged the company's difficulties, stating that 2024-25 would be "a year of transition" before a resumption of growth. The company has predicted organic sales will decline between 15% and 18% in the full year, with an operating profit margin of between 21% and 22% on an organic basis.
To mitigate the impact of these tariffs and economic slowdowns, Remy Cointreau has announced plans to raise prices and reintroduce targeted marketing in the US and China. The company is also banking on a recovery in the US market, although CEO Eric Vallat has cautioned that this may not happen until the fourth quarter.
Investors will be watching Remy Cointreau closely in the coming months as it navigates these challenging market conditions. The company's ability to weather the storm will depend on its strategic cost-cutting measures, targeted marketing efforts, and the resilience of its premium brand portfolio.
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