Pernod Ricard Shares Rise Despite Cut in Sales Forecast

Pernod Ricard, the French spirits maker, experienced a 6% increase in its shares on Thursday despite announcing a reduction in its full-year sales forecast and share buyback program. 

The company’s performance in key markets such as the United States and China fell short of expectations, prompting adjustments to its outlook.

Revised Sales Forecast and Buyback Program:

Pernod Ricard now anticipates that its full-year sales will remain flat, a departure from its earlier growth projection. Additionally, the company has revised its share buyback program, reducing it to 300 million euros from the previously expected range of 500-800 million euros.

While acknowledging the challenges faced in the first half of the fiscal year, CEO Alexandre Ricard expressed confidence in the company’s prospects for the second half. He noted that the management has gained greater visibility regarding the path forward.

Disappointing Performance in Key Markets:

Pernod Ricard had anticipated improvements in its significant markets, particularly the United States and China. 

However, retailers in the U.S. continued to reduce their inventories of expensive spirits, while economic difficulties in China dampened consumer demand ahead of the Lunar New Year celebration.

Impact on Sales and Strategic Brands:

First-half net sales in the United States and China witnessed significant declines of 7% and 9%, respectively. 

Most of Pernod Ricard’s key strategic international brands also experienced negative growth globally, reflecting the challenges in these markets.

Analyst Perspective and Medium-Term Guidance:

Analysts, including Edward Mundy from Jefferies, believe that Pernod Ricard may be approaching the lowest point in its performance trajectory. 

Despite the current challenges, there is optimism about the company’s medium-term potential, with Pernod Ricard maintaining its guidance of 4% to 7% top-line growth.