Pernod Ricard Forecasts Sales Growth Amid Market Challenges

By Emma Rumney

Reuters – On Thursday, France’s Pernod Ricard (EPA:PERP) projected sales growth for the upcoming year despite ongoing challenges in the U.S. and Chinese markets, following a 1% drop in annual sales that aligned with forecasts and its own guidance.

The second-largest Western spirits producer has faced tough conditions as the post-pandemic surge in premium alcohol sales has waned due to high interest rates, inflation, and economic issues in China, the leading market for alcoholic beverages.

Particularly affected are brands like Absolut vodka and Jameson whiskey, as retailers and wholesalers in the U.S. reduce their high-priced spirits inventory. Sales have also slowed in China due to a struggling economy impacting consumer confidence.

For the year ending in June, net sales dropped by 9% in the U.S. and 10% in China. Pernod anticipates a “soft” first quarter of 2025, with continued adjustments to U.S. inventory and a “very weak macro context in China”.

Despite these challenges, Pernod expects a positive performance elsewhere, anticipating that ongoing volume recovery will push net sales back into growth.

CEO Alexandre Ricard stated, “The key message is back to growth,” emphasizing that while consumer sentiment is volatile, it remains resilient in many markets.

After an initial slight rise in shares during early trading, they surged by 8% following news that China’s Commerce Ministry would not impose provisional tariffs on EU-imported brandy, with shares climbing 3.37% at 0834 GMT.

In July, top spirits maker Diageo (LON:DGE) negatively impacted sector shares with a pessimistic outlook for next year, stating uncertainty over when consumer conditions and net sales might rebound. Both Diageo and Pernod express confidence in returning to higher growth rates, though some analysts view these ambitions as overly optimistic given current industry challenges.

Ricard refrained from specifying when Pernod might achieve its target of organic net sales growth close to 7%, but stated it was not a long-term goal.

Investor skepticism remains, as noted by Charles de Riedmatten, a fund manager at Myria AM. He remarked, “I don’t know why they stick to this,” highlighting that Pernod rarely attained such growth before the pandemic and suggesting that more realistic guidance could aid long-term share performance.

Pernod’s 1% decline in 2024 organic net sales slightly bettered the analysts’ anticipated 1.2% drop. Meanwhile, profit from recurring operations outperformed estimates, rising by 1.5%.