Shares in Remy Cointreau surge on better-than-expected update

(Sharecast News) - Shares in Remy Cointreau jumped on Friday, after the drinks group toasted better-than-expected trading in the third quarter. The French firm said sales in its cognac division - home to Remy Martin and Louis XIII - fell 34% in the three months to December end, on the back of destocking in China and a "persistently sluggish" US market.

The US has been hit by a surge in promotional activity as well as higher interest rates, which has cut distributors' financing capacity. Remy does not expect to return to growth in the US before the 2024-25 full-year.

However, sales in its liqueurs and spirits division, which includes Metaxa and Mount Gay as well as Cointreau, rose 4%. Remy attributed the improved sales performance to the US, where demand for The Botanist gin and Cointreau had been strong.

It also noted a "significant sequential improvement" in the Americas compared to the second quarter, and said destocking in China ahead of the Chinese New Year was temporary.

Group sales fell nearly 24% in the third quarter, slightly ahead of analyst forecasts.

By 1130 GMT, the Paris-listed stock had put on 16%.

Looking to the rest of the year, Remy Cointreau sale the decline in annual sales would come in at the lower end of the guidance range, of 15% to 20% on an organic basis.

But if flagged a "contained" organic decrease in the margin through a cost-cutting programme, which is expected to save around €100m this year.

On a nine-month basis, organic sales fell 23% to €956.6bn.

Jefferies, which has a 'buy' rating on the stock, said: "Sequential improvement in the US is offset by destocking in China. However, this is well understood by the market.

"Remy, in our view, is one of the most attractive long-term growth stories in European beverages, given high barriers to entry and premiumisation trends."