Ahead of results next week, Diageo PLC (LSE:DGE) led the FTSE 100 risers on Friday after investors took heart from results from LVMH and Remy Cointreau.
LVMH’s Wines & Spirits business delivered organic sales growth in the fourth quarter after declining in the two previous quarters.
Bank of America described the performance from the division as “the biggest positive surprise” in the quarter with 4% revenue growth after two quarters of 20%-plus declines.
The bank noted management stated the "worst of cognac demand behind us".
Meanwhile, shares in Remy Cointreau surged 13% after it posted a slightly smaller-than-expected decline in third quarter sales.
Russ Mould at AJ Bell said investors had taken “comfort from LVMH’s results, as well as some green shoots in Remy Cointreau’s results, that the luxury sector isn’t completely broken.”
In November, Diageo warned about a drop in Latin American drinking which led investors to speculate that demand for expensive spirits might be waning.
But Mould pointed out LVMH’s latest update struck a confident tone, giving a lift to luxury-related stocks.
“Also helping to drive the sector was Remy Cointreau’s latest figures which showed a quarter-on-quarter improvement in the Americas, a region that has been awash with promotions and retailers/wholesalers running down existing stocks,” he added.
“It seems the sector could go through a phase where investors are rewarding companies that say things are not as bad as feared, rather than saying everything is going well.”
But others are less sanguine, with Deutsche Bank saying last week that industry data and peer read-across suggest that spirits demand has continued to deteriorate following the November profit warning, leading the bank to further reduce its estimates for both first-half and full-year 2024.
Shares in Diageo, which owns Johnnie Walker were up 4% in late morning on Friday.