Remy Cointreau, the renowned French spirits manufacturer, has generated its initial quarter of sales growth since the start of 2023, and has accordingly updated its annual profit forecast. This encouraging development is attributed to the easing of tariff threats.
Recovering from a Sales Slump
Remy Cointreau’s major markets in the US and China had suffered a significant slump in sales over the past few years. This downturn led to the company repeatedly lowering its guidance and abandoning its mid-term sales objectives. Nevertheless, in June, the company announced that it was beginning to recover.
The producer of Remy Martin cognac and Cointreau liqueur reported a 5.7% year-on-year surge in organic sales in the first quarter, exceeding market predictions. This upward turn came shortly after the appointment of the new CEO, Franck Marilly, in June. In response to the news, the company’s shares increased by over 4%.
The company attributed its growth in the quarter to a low comparison base from the previous year in the US. While sales in China continued to decline, the company described the slump as “limited”.
Charles de Riedmatten, a fund manager at Myria AM and a Remy investor, optimistically remarked, “After two years of declining growth, I think it’s the beginning of good news.” However, he also noted that the character of Remy’s growth, which it described as technical, was challenging to evaluate.
De Riedmatten also expressed concerns about the underlying demand for cognac and questioned how the new CEO, with his background in luxury goods but not spirits, would perform.
Impact of Tariffs
Even before tariffs became a threat to both the US and Chinese markets, high US inflation and a pessimistic Chinese consumer base were already impacting Remy’s business.
However, in July, the cognac industry reached an agreement with China to alleviate the steep duties enforced since October 2024. Consequently, Remy predicts that the annual economic impact from tariffs will decrease to 45 million euros from the previous estimate of 65 million euros. This reduction is primarily due to a decrease in the financial effect of Chinese duties from 40 million euros to 10 million euros.
Despite this, the company has increased its projected financial impact from US tariffs on European goods by 10 million euros, bringing the total to 35 million euros. The upward adjustment is in response to US President Donald Trump’s threat to impose a 30 per cent tariff on EU imports as of August 1.
Future Profit Expectations
Remy Cointreau now expects its full-year operating profit to decline by a mid- to high-single-digit percentage, exhibiting an improvement compared to the mid- to high-teen decline it had originally anticipated.
Approximately 70% of the company’s sales are derived from cognac and are primarily concentrated in the US and China. This focus leaves Remy Cointreau more vulnerable to tariffs and economic downturns than their more diversified counterparts.
Questions & Answers
What has led to the increase in Remy Cointreau’s sales?
The easing of tariff threats and a low base of comparison from the previous year in the US have contributed to the increase in Remy Cointreau’s sales.
What are the concerns about Remy Cointreau’s growth?
Questions remain about the underlying demand for cognac, and there are doubts about how the new CEO, with his background in luxury goods but not spirits, will perform.
How has Remy Cointreau adjusted its annual profit forecast?
Remy Cointreau now expects its full-year operating profit to decrease by a mid- to high-single-digit percentage, an improvement compared to the mid- to high-teen decline it previously anticipated.
