Pernod Ricard said on Thursday it was confident sales growth would remain dynamic through its 2023 fiscal year after it delivered forecast-beating sales in the first quarter, helped by price increases as consumers trade up to its premium spirits.
Pernod, the world’s second-biggest spirits group behind Diageo, successfully raised prices in the United States, its top market, in the quarter while demand was strong in China during the mid-autumn festival and in India and a rebound in global travel retail continued.
Sales for the group — which owns Jameson whiskey, Martell cognac, Mumm champagne and Absolut vodka among other brands — jumped 11 per cent on a like-for-like basis to €3.308 billion in the first quarter. That was above market expectations for a 9.3 per cent sales rise.
As much as 7 percentage points of the growth came from charging more for its spirits as inflation continued to rise in key markets.
“I am hugely encouraged by our start to the year,” chairman and chief executive Alexandre Ricard said in a statement. He said the group had yet to see any evidence of consumers switching to lower-priced spirits amid economic pressures.
“At this stage, we don’t see any downtrading,” Mr Ricard said.
In an environment that remained volatile with high inflation, the war in Ukraine, and Covid-19 lockdowns in some Chinese cities, the group said it expected sales growth for the full year would remain “dynamic and broad-based, albeit moderating on a normalising comparison basis”.
It however did not provide a quantitative guidance for the full year. Shares were down 1.1 per cent at €178.
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Pernod said it will buy back shares worth between €500 million and €750 million during the year. The company plans to pay a dividend matching about 50 per cent of the prior year’s recurring net profit.
The company plans 2023 capital expenditures on acquisitions and other investments of about 7 per cent of net sales, it said.
RBC analysts said in a note the quarterly performance was “good” but noted that: “US organic sales growth of 2 per cent is somewhat concerning ... it seems that the US market is slowing.”
In China alone, sales rose 9 per cent in the first quarter thanks strong mid-autumn festival sales. The Martell cognac brand recorded double-digit sales growth during the quarter despite Covid restrictions.
Sales in global travel retail rose 24 per cent as it continued its recovery outside of China and was on track to deliver profit back to pre-Covid levels, the group said. — Reuters/Bloomberg
