Pernod Ricard, the maker of Martell cognac and Absolut vodka that is in talks about a potential merger with U.S. rival Brown-Forman, posted a slightly stronger-than-anticipated performance in the third quarter, but cautioned that a slump in tourism related to the war in Iran would dent its travel retail operations and weigh on full-year results.
For the three months ended March 31, the company recorded group sales of 1.95 billion euros, representing a like-for-like increase of 0.1% compared with the prior period. That outcome exceeded the average forecast in a company-compiled analyst poll, which had projected a 0.7% decline.
The third-quarter result marked an improvement from a 5% contraction reported in the second quarter. Pernod Ricard attributed the rebound to stronger demand in India and to gains in global travel retail sales. Those gains were sufficient to offset continuing soft consumer demand in both the United States and China.
Despite the quarterly uptick, the company warned that declines in tourism - which it linked to the war in Iran - would hit its travel retail business and have an adverse effect on its full-year performance. Pernod Ricard now anticipates that group organic net sales will decline by between 3% and 4% in fiscal year 2026.
Looking beyond fiscal 2026, Pernod Ricard reiterated its prior guidance calling for group sales growth of between 3% and 6% across the 2027 to 2029 period. The company presented this medium-term objective in the context of an industry-wide downturn in alcohol demand.
Exchange-rate information provided with the results noted that 1 US dollar equals 0.8467 euros.
Summary
Pernod Ricard posted a marginal like-for-like sales increase in Q3 to March 31, supported by improved performance in India and travel retail. However, the company warned that reduced tourism tied to the war in Iran would suppress travel retail sales and drive a projected 3% to 4% decline in group organic net sales for fiscal 2026. Management reaffirmed longer-term sales growth guidance of 3% to 6% for 2027-2029.
Key points
- Pernod Ricard reported Q3 sales of 1.95 billion euros, a like-for-like rise of 0.1%.
- The company expects a 3% to 4% decline in group organic net sales for fiscal year 2026, citing reduced tourism from the war in Iran as a factor harming travel retail.
- Management reaffirmed sales growth guidance of 3% to 6% for 2027-2029, despite a broader industry slump in alcohol demand.
Risks and uncertainties
- Reduced tourism associated with the war in Iran is expected to negatively impact travel retail sales, affecting the consumer travel and retail sectors.
- Persistent weakness in consumer demand in the United States and China could continue to restrain sales in those markets, impacting multinational beverage companies and related retail channels.
- An industry-wide slump in alcohol demand introduces uncertainty for medium-term growth projections across the spirits sector.