Remy Cointreau’s China Woes Continue
January 22, 2014 Leave a comment
Remy Cointreau’s China Woes Continue
French Drinks Maker’s Sales Have Been Hit by China’s Crackdown on Gift-Giving
RUTH BENDER
Updated Jan. 21, 2014 2:53 a.m. ET
PARIS— Rémy Cointreau
SA RCO.FR +1.89% said Tuesday it doesn’t expect sales to rebound in China during the crucial Lunar New Year holidays after China’s crackdown on gift-making pushed down sales over 20% in the latest quarter.The French drinks maker said sales in the three months to Dec. 31 fell 22% to €287.6 million from €368.7 million in the same period last year as the Chinese bought less high-end cognac.
The French company has suffered along with rivals in recent quarters as the Chinese government has scaled back on sponsored banquets and gift-giving among corporate and public officials, which for years had propelled sales of high-end spirits and other luxury goods.
On an organic basis—stripping out currency moves, disposals and acquisitions—sales fell 19% in the period and were down 9.4% since the beginning of the group’s financial year, which ends March 31.
“The campaign to promote morality in China is expected to continue to adversely affect the consumption of ultra-premium products and no significant recovery can be expected due to the Chinese New Year,” the group said in a statement.
The Paris-based group earlier this year warned that the cutback on sponsored banquets and gift-giving in China, which has also hit larger rivals such as Pernod Ricard
SA,RI.FR +1.03% would push the company’s operating profit down at least 20% for the fiscal year. It said Tuesday that it expected a “significant” double-digit decline in operating profit for the year.
Sales for Rémy Cointreau’s upscale Remy Martin cognac, which has been the key growth driver in China, fell 35% in the latest quarter to €138.7 million, as Chinese retailers refrained from placing big orders as they are still getting rid of large stocks that have accumulated since sales began falling.
Rémy Cointreau currently faces additional uncertainty as its chief executive unexpectedly resigned last month, citing personal reasons, which has left the company under interim management of Chairman François Heriard Dubreuil.
Remy’s shares have been hit hard over the past year by the sales decline in China. As of Monday’s close Remy stock had lost 39% over the past 12 months.
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