Eric Vallat is celebrating a rare win. On Friday, the chief executive of $5.5 billion Remy Cointreau (RCOP.PA) saw the cognac maker’s shares surge 13% after it beat third-quarter sales expectations. That’s because the outlook hasn’t got any worse than it had projected last October when he cut full-year sales guidance. Thanks to more stability in the U.S. and China, Remy reckons the annual sales decline will be at the lower end of its guidance range of 15% to 20%.
Still, investors face a long wait for actual growth. Vallat reckons U.S. revenue will continue to decline until the 2024/25 financial year. That’s a problem for a company that makes 50% of its revenue in the world’s largest economy. Vallat’s main issue is he has few levers to pull to improve the company’s fortunes. Cash-strapped consumers are drinking less and choosing cheaper booze, which has led to a pile-up of excess stock at Remy, as well as other drink makers like Diageo (DGE.L). A Chinese anti-dumping probe is another curveball.
If the U.S. and Chinese economies improve, demand is likely to increase and help boost Remy shares that have halved in value since last January. But with few signs of good news, it’s not very clear when that will be. (By Aimee Donnellan)
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(The author is a Reuters Breakingviews columnist. The opinions expressed are their own.)
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