French spirits maker Rémy Cointreau has cut its sales and profit goals for the year due to a weaker-than-expected rebound in US sales and deteriorating market conditions in China.
It came after organic sales fell 11% to €268.8m (£236.6m) in its fiscal second quarter, below analysts’ estimates of a 9% decline to €273.8m.
Rémy now expects organic sales growth to fall between stable and low-single digits, down from mid-single-digits previously. It added operating profit would likely fall by between low double digits and mid-teens compared with a mid-single digit decline previously.
The group’s cognac sales took the hardest hit last quarter, with sales down 13.5%, primarily reflecting tough market conditions in China. An unfavourable calendar effect that included the mid-autumn festival also had a negative effect.
Sales in its Europe, Middle East, and Africa region fell 9.2%, mainly due to “fierce promotional pressures and sluggish overall consumption”.
Rémy and its European rivals are all caught up in deteriorating global trade tensions. China suspended duty-free sales of cognac last year in retaliation for EU tariffs on Chinese electric vehicles, while the US has imposed 15% tariffs on all Rémy’s exports from the EU.
In July, Rémy raised its full-year profit guidance after claiming it had avoided a worst-case scenario for tariffs in China thanks to an industry-wide deal.
Rémy’s rival, Pernod Ricard, also reported a larger-than-expected sales drop last quarter due to falling demand in China and clearing out of excess stock in the US.
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