Pernod Ricard banks on 'dynamic' 4th quarter as US, China drag on sales

By Dominique Vidalon and Emma Rumney

PARIS/LONDON (Reuters) -Pernod Ricard missed third-quarter sales forecasts on Thursday as its big U.S. and Chinese businesses remained under heavy pressure, and the spirits group will need an uptick in demand over the next few months to meet its full-year target.

Consumers have been cutting back on expensive spirits in the world's top two economies, and Pernod, which makes Martell cognac and Absolut vodka, had been hoping trends would improve following a cut to its full-year forecast in February.

But the world's No.2 Western-style spirits maker on Thursday pointed to a "soft" Lunar New Year in China, when huge celebrations normally boost spirits sales. Its shares were down almost 3% by 0825 GMT.

Investors in several sectors from drinks to luxury goods are fretting about Chinese demand as the world's second-largest economy sputters.

In the United States, wholesalers and retailers continued to cut expensive spirits from their inventories as sales come off extraordinary highs seen after COVID-19, Pernod said.

It left its full-year guidance unchanged, betting "dynamic" fourth quarter sales could help meet its forecast for a broadly stable annual performance.

Chief Financial Officer Helene de Tissot said that Pernod would benefit from favourable comparative numbers in the fourth quarter against a year ago, and it also anticipated an acceleration in sales growth.

That acceleration was already underway in some markets, she continued, flagging India, where sales rose 8% as one example.

In China and the United States, however, where sales fell 12% and 11% respectively, de Tissot said difficult conditions were set to continue.

U.S inventory turbulence would extend into the fourth quarter and Pernod's next financial year, she said, with destocking now occurring more at the wholesale level.

Pernod's full-year performance in China would likely be similar to its performance year to date, de Tissot continued.

Chris Beckett, head of equity research at Pernod investor Quilter Cheviot, said Pernod's full-year guidance seemed a "difficult ask" given U.S. and China challenges, but the company seemed confident.

While the near future is uncertain, in the longer-term spirits companies seem set for growth, he said.

($1 = 0.9338 euros)

(Reporting by Dominique Vidalon in Paris and Emma Rumney in London; Editing by Benoit Van Overstraeten, Sherry Jacob-Phillips, Shri Navaratnam and Tomasz Janowski)