(Reuters) – Remy Cointreau’s CEO said on Thursday he aimed to end the year with a “sound” level of stock in the United States but it was unclear when these would start to move, after reporting a 43% fall in first-half operating profit.
High levels of unsold inventories in Remy’s key market have become a key issue for watchers of the French spirits group, which makes Remy Martin cognac and Cointreau liqueur, after they contributed to a cut in full-year guidance in October.
Americas, led by the United States, account for about half of the group’s sales and the U.S. market is critical for its overall performance.
The company’s U.S. sales have fallen as retailers and wholesalers try to clear their elevated inventories following a post-pandemic boom for Remy.
That was exacerbated by a squeeze on their finances that left them less willing to hold Remy’s slower-moving brands, and heavy discounting from competitors.
Chief executive Eric Vallat told journalists the group still had around five months’ worth of stock in the U.S. market, and while demand was improving it was unclear when sales from wholesalers to retailers would pick back up.
“The goal is to end the year with sound stocks,” he said, adding this would mean around three or four months’ worth.
Remy’s shares fell just over 1% at market open but recovered to trade around 3% higher by 0815 GMT.
The group’s operating profit for the six months to Sept. 30 fell 43% to 169.1 million euros ($185.64 million), in line with analyst expectations in a company-compiled poll.
It already reported a 22.2% drop in first-half sales. Out of a 100 million euro ($109.47 million) cost-cutting plan announced in October, it had so far achieved 25 million euros, the group said.
Charles de Riedmatten, fund manager at Myria AM, a Remy investor, said this was low and Remy could struggle to control its marketing costs.
“For H2, I will be really cautious,” he said, adding the U.S. market in particular remains difficult and its not clear when it will improve.
Remy reiterated its full-year forecast, saying the U.S. would not see growth in sales before the next financial year.
($1 = 0.9135 euros)
