French drinks group Rémy Cointreau expects sales during its fourth quarter to have decreased by 26% and anticipates an even greater decline in the first quarter of its 2020/21 fiscal year.
The group said despite an “excellent” start to the Chinese New Year celebrations in January and “good resilience” in the e-commerce channel since the start of the covid-19 pandemic in China, sales took a hit during the three months to the end of March 2020. Rémy Cointreau estimates that its total revenue for the 2019/20 fiscal year will be down 12% in organic terms.
As a result, the group said current operating profit is likely to have decreased by 25% to 30% in organic terms for the fiscal year 2019/20. However, Rémy Cointreau said it was “witnessing some improvements in Greater China” where most shops have reopened, along with some restaurants and bars.
But, it believes its Chinese wholesalers will destock for several months before they start replenishing, possibly before the mid-autumn festival. Combined with “significant weakness” in global travel retail and an expected deterioration of trends in the EMEA and Americas region over the coming weeks, sales for the current quarter are expected to experience an even bigger decline.
Nonetheless, Rémy Cointreau said the group “remains confident about its ability to get through this sanitary crisis and to emerge from it even stronger over time”. It noted that the company has approximately €300 million (US$324m) of excess cash, on top of its estimated needs, as of the end of March 2020.
Last month, Jameson owner Pernod Ricard forecast a 20% decline in operating profit for its 2020 financial year as a result of the global impact of coronavirus.