Stock price: €28 ($39.53 USD)
Conclusion: Huge premium to the sector looks expensive in light of a tough start…
Q1 sales (April-June): down 7.5% reported and down 14% organic. No guidance given for the year.
Remy Cointreau first quarter numbers confirm that the spirits industry keeps struggling, with reduced spending from consumers both on the on and off-trade and continued destocking from distributors. Growth in China could not compensate for lower cognac sales in the US and in global retail (cognac sales down 15% organic). The extent of the decline in champagne (-40% organic) was even greater and partly due to the planned reduction in non branded champagne shipments to the UK. Liqueurs and spirits sales remained negative, down 7.5%.
Q1 numbers lead us to downgrade our expectations for the year.
We forecast sales to fall by 8% this year and net earnings to decline by 26%, as result of operating deleveraging, higher expenses related to the transition to owned distribution and also financial expenses driven by projected cash outflow.
Remy trades at 19x 2009 estimates versus 11-12x for peers in the sector (Diageo (DEO) and Pernod Ricard (PDRDF.PK)). Such a premium could be justified by an eventual takeover scenario. We do not expect it at a time when management is taking a long term view and investing in its own distribution network.
Disclosure: No positions