Pernod Ricard reports Q1 results; gives FY 2027 and beyond outlook

Pernod Ricard SA (PERP) revealed a less severe decline in Q1 organic sales than initially anticipated on Thursday. The French drinks company attributed the improvement to a strengthening in India and expanding volumes, which counterbalanced sharp drops in the U.S. and China. Organic net sales slipped by 0.9% in the quarter, surpassing analysts' consensus estimate of a 1.7% decline.

The range of predictions within the consensus spanned from a 3.8% decline to a 0.2% decline. Net sales were down 6.3% to €2.23 billion, primarily due to a €127 million loss from the sale of Imperial Blue and Wines, and a €3 million decline from currency fluctuations, mainly involving the Indian rupee and Turkish lira. Yet, sales volumes climbed by 6%, and Strategic International Brands volumes grew by 2%.

Excluding the U.S. and China, overseas sales surged by 4%. India's sales rose by 19%, driven by robust demand and sustained premiumization, particularly for Jameson, Absolut, and Ballantine's spirits. The company also highlighted the impact of lapping the excise policy adjustments in Maharashtra last year and its preparatory steps for an imminent initial public offering of its Indian business, which contributed to a "pipe-fill" effect benefitting first-quarter sales.

The IPO decision is pending board approval. Sales in Asia-Rest of the World increased by 9%. U.S. sales fell by 10%, influenced by inventory adjustments, as expected. The company noted that the U.S. spirits market saw a 2% drop in value, while bottled spirits declined by 4%. China's sales plummeted by 25%, due to inventory adjustments amid a difficult economic climate.

Underlying depletions in China resumed growth, reflecting cautious trade optimism ahead of the Mid-Autumn Festival. Martell's off-trade depletions expanded, while on-trade sales remained challenged by regulatory restrictions. Europe sales declined by 6%, owing to market phase-ins and ongoing on-trade pressure. The Americas experienced a 9% sales drop.

Globally, Travel Retail sales slipped by 4%, impacted by the Middle East conflict. For the year, Pernod Ricard expects organic net sales to remain broadly stable, contrasting with an uncertain environment. The company anticipates declines in the U.S. and China, driven by inventory adjustments from the first quarter, with an expectation of improved underlying trends in China.

It also foresees continued positive momentum in the rest of the world, with strong growth in India. For fiscal years 2027 to 2029, the company aims for organic net sales growth, on average, near the lower end of a 3% to 6% range, despite ongoing challenges in the U.S. market. The company targets a net debt-to-EBITDA ratio below 3x by fiscal 2029, supported by cost-saving measures from fiscal 2026 to 2028.