Pernod Ricard’s sales hit by weakness in US, China

Pernod Ricard's first-quarter sales have been dragged down by the US and China due to inventory adjustments and the impact of macroeconomic challenges.

The Absolut Vodka maker reported today (16 October) organic net sales dipped 7.6% and were down 14.3% on a reported basis at €2.38bn ($2.77bn), results that underperformed some analysts' expectations.

Sales were "grimmer than expected", Bernstein's Trevor Stirling wrote in a research note to clients.

Bernstein analysts had forecast a 6.2% drop in organic sales, while the consensus estimate was for a 7.1% decline.

Pernod's Americas market saw organic sales fall 12% to €641m, more than double the 5% decline forecast by Bernstein. The US performance in particular "was a big miss", Stirling said, with sales slumping 16%.

In the results statement, the group said it was "encouraged" by ongoing improvement in sell-out performance in the US but added the spirits market remained "subdued".

US sales were also hit by inventory adjustments, which the Jameson whiskey distiller said it had "expected".

"The gap to market is shrinking and sell-out trends are improving; however, as long a volumes are declining, there will be a risk of further de-stocking," Bernstein's Stirling said.

On an investor call this morning, CFO Hélène de Tissot said it was "too early to really be quite specific on what to expect in the US because obviously we are only starting the season as we speak".

She added: "As you know, our focus is really to keep improving our sell-out momentum, which has been quite continuously materialising this improvement for already a few months now. But obviously there is as well the impact on the inventory adjustment."

Those adjustments in the US are likely to play on the "trajectory" for the full year, she said.

In China, the Altos Tequila maker's organic sales dropped 27%. The group's Asia and Rest of World market saw a decline of 7% to €991m.

Sales in China still face a "challenging macroeconomic environment", the business said. In the first quarter, it saw "soft" demand from drinkers in the summer and during the Mid-Autumn Festival, with on-trade being especially affected.

The group added that it remained "cautious on the demand environment" as the Chinese New Year approaches.

Pernod's global travel retail segment also continues to see declines, with sales falling organically by 15% in the first quarter, attributed to the suspension of duty free sales in China following the Cognac anti-dumping investigation, as well as weak sales in GTR outside of China.

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The business anticipates travel retail will return to growth over the full year of 2026. Sales in China GTR are expected to resume in the second quarter.

De Tissot told analysts today that the second half of the year would be stronger than the first half, with the resumption of Martell Cognac sales into China duty free being one of several factors that would help to bolster performance.

When asked by Barclays analyst Laurence Whyatt whether the business anticipated travel retail for Martell in China to return to what it was in the first quarter of calendar year 2025, de Tissot said there was "some link" between domestic demand and travel retail demand for the brand in China.

"The consumer demand in China domestic is very soft... so I would say it would be cautious to assume at that stage that the demand in China travel retail could be a bit lower than it was one year ago," she said. "But we'll know that obviously, in few months."

Speaking to analysts following the release of its full-year results in August, de Tissot said the group expected to see "some improving trends in China towards stabilisation".

She said at the time: "So when you look at the blocks and the improving trends for the group for the full year, I would highlight China and travel retail in those type of positive blocks.”

"Pernod Ricard’s sales hit by weakness in US, China" was originally created and published by Just Drinks, a GlobalData owned brand.

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