Remy has strong first quarter as cognac outperforms in China
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Remy has strong first quarter as cognac outperforms in China

Chinese thirst for cognac helped push luxury spirits seller Remy Cointreau higher last week. The company released first quarter earnings that demonstrated a strong start to the year, setting its share price on a modest climb, despite trade war rhetoric weighing on the market. Remy’s results beat expectations, as its focus on the high end of the spirits market paid off amid a rebound of Chinese demand.

Remy’s share price rose by 4% in 5 days last week

graph 2407 remy

SOURCE: Yahoo Finance

Sales in the first quarter hit €241.5 million – that’s like-for-like growth of 5.9% against the first quarter in the previous year. Analysts had expected to see growth of 5.3%. In China, those revenues were far higher, hitting double digits. The company’s strategy to focus on pricier spirits ($50 per bottle and over) is playing out well in China – even if it’s dampening demand in the U.S. and Europe. According to Remy, demand should “normalize” in the very near future.

At the moment, however, China is more than making up for lagging palettes in the west. Remy said that sales of Remy Martin cognac accounted for roughly 75% of group profit, and were up by 11.1% on a like-for-like and year-on-year basis. This increase was due to “highly favourable trends in Greater China and sustained growth in Singapore, Australia, and Japan,” according to Remy.

The one blight on Remy’s future is shared by many brands – the possibility of a full-blown trade war. The U.S. remains Remy’s largest market, and the company is resolute that production has to stay in Europe. The company’s chief financial officer, Luca Marotta, told reporters “in the case of a trade war, we would have to increase prices. We cannot change the way we are building our operations. We cannot produce cognac in Texas.”

Speaking to the quarter more widely, Marotta said that sales were “well in line with group expectations,” and he expected to see an acceleration in the coming quarters.

Disclosure

Dominion holds Remy Cointreau in its Global Trends Luxury Fund.


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