Remy Cointreau sees strong demand from east and west
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Remy Cointreau sees strong demand from east and west

Remy Cointreau reported second quarter earnings on Tuesday, saying that strong demand from China and the U.S. drove sales up. Investors could be forgiven for thinking that these better than expected results would lead to a massive pick up over the next six months – but the company was quick to dampen those hopes.

In an announcement that Bernstein analyst Trevor Stirling called a cause of “mild disappointment”, Remy said that it would invest heavily in advertising, and a strong euro would knock around nine and a half million dollars off net income. As a result, sales growth in the second half will come in at about the same as it did in the first half: 7%.

Remy Cointreau’s share price has risen by 32% so far this year

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SOURCE: Yahoo Finance

Like for like sales in the second quarter, minus “currency effects and disposals or purchases” were up by 6.2% against the same period in the previous year, beating analysts’ expectations. Remy was quick to point out that it had seen significant improvements in both the U.S. and Chinese markets, and that it was looking to improve profit margins by focusing on premium spirits, which are priced at $50+ per bottle.

In China, where the company is riding the same wave of recovery as other dark spirit sellers, those $50 bottles are just the tip of the iceberg. The company is pushing its $3,000 Louis XIII cognac, hoping that private consumption takes a turn towards the luxurious. If the wider luxury sector is anything to go by, it just might. The company’s finance director, Luca Marotta, said that he expects to see more positive performance from the country in the next three to five years.

In the U.S., Remy is looking at another huge opportunity: the world’s biggest cognac firm, Hennessy (part of LVMH) has run low on stocks of its popular, lower-end, “VS” cognac. According to Marotta, this “new space” in the market won’t last forever: “we have to profit from this moment to be more visible,” he said on an earnings call.

Disclosure

Dominion holds Remy Cointreau in its Global Trends Luxury Fund.


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