By Andrea Figueras


Pernod Ricard posted a decrease in sales for its fiscal third quarter as it grapples with soft consumer sentiment in China and continues to reduce inventories in the U.S.

The French distiller said Thursday that for the three months to the end of March sales fell 2% in reported terms to 2.35 billion euros ($2.51 billion) compared with the year-earlier period.

Analysts had forecast quarterly sales of EUR2.4 billion, according to a poll of estimates compiled by FactSet.

The performance was hit by weak results in China, due to a difficult macroeconomic environment, and in the U.S., as trade inventory levels are adjusted, the company said.

At 1000 GMT shares in Pernod Ricard traded 3.4% lower at EUR140.15. Shares in peers Diageo and Davide Campari-Milano were also more than 1% lower, and Remy Cointreau stock was 0.9% lower.

After positive trends during the pandemic, drinks makers are facing a more normalized growth environment, leading to high stock levels, particularly in the U.S., where the company posted a decline by 11% in sales during the quarter.

As with other names in the industry, Pernod Ricard is grappling with softened consumer demand in China, where it reported a 12% drop in sales.

Pernod's performance remained poor in the U.S. and deteriorated in China, Stifel analysts Cedric Lecasble and Cedric Norest said in a research note.

However, the company said its cognac brand, Martell Noblige, performed well in the Asian country. This comes months after the Chinese government launched an anti-dumping investigation on brandy imported from the European Union, which was seen as a potential hit to the performance of drinks makers. Furthermore, Pernod Ricard noted that there is a gradual recovery of Chinese travelers, which boosted its travel retail sales.

The maker of Absolut vodka backed its mid-term financial targets, including reaching the upper end of its target range of between 4% and 7% in net sales growth and organic operating leverage of 50 to 60 basis points.

For the current year, the company expects broadly stable organic net sales, while it intends to continue to focus on growth and operational efficiencies. The reiterated top-line outlook suggests that the company remains confident of improving during the final quarter despite weaker-than-expected third-quarter sales, Jefferies analysts Edward Mundy and Andrei Andon-Ionita wrote in a note to clients.

Pernod also narrowed its organic profit from recurring operations estimate to around 1%. It previously said it anticipated low-single digit growth.

The company said it will pay an interim dividend of EUR2.35 per share in July, while the final dividend will be subject to the decision at the company's annual general meeting on Nov. 8.

Peer Remy Cointreau is scheduled to post full-year sales for its fiscal 2024 on Friday, while Davide Campari-Milano will publish an update for the first quarter on May 7.


Write to Andrea Figueras at andrea.figueras@wsj.com


(END) Dow Jones Newswires

04-25-24 0625ET