Pernod Ricard, the owner of drinks brands such as Malibu and Jameson, rose close to 5% in trading on Thursday after it revealed it was aiming for the upper end of sales guidance over the next two financial years.
Sales may have slowed by 8% to around €3 billion in the spirit manufacturer’s first quarter but investors are clearly finding solace in management’s expectations that revenues in 2024 and 2025 could grow by as much as 7%.
Plans are also in place to improve margins by between 50bps and 60bps and although a “challenging environment” is persisting into 2024, the company, which also owns the Beefeater brand, has a string of plans in place to minimise headwinds.
Some of these tactics include disciplining its investments, adapting to easing inflationary pressure, reducing foreign exchange impacts, and continuing with a €500 to €800 million share buyback.
During the first quarter of 2024, the French company suffered many of the headwinds facing the luxury market, as seen by Parisian giant LVMH, with sales in China and US slipping by 8% as consumer demand continues to soften.
Alexandre Ricard, chairman and chief executive officer, said in a company statement: “As expected we experienced a soft start to the year, yet I am encouraged we have largely offset declines in US and China this quarter, thanks to our good performance in other markets.
“In the months to come I look forward to sharing with you exciting brand activations and innovations across our full portfolio. I am confident that we can deliver broad-based and diversified organic sales growth in FY24.”
Analysts at Deutsche Bank aren't as convinced about the group's success going forward, labelling the stock a 'sell'.
"We continue to see Spirits as an attractive category for the long term and believe Pernod's category exposure and execution leaves it well placed to deliver long-term value for shareholders. However, we expect cyclical headwinds to cause growth to slow and see Pernod's premium focus leaving it at greater risk of downtrading than some peers," the German bank said.
Shares in the Kahlua and Jacobs Creek owner are down more than 10% in 2023, but following strong gains on Thursday it is trading at around €165.
Edited to add comments from analysts