By Ruth Bender
PARIS-- Rémy Cointreau SA Thursday said a sales decline in China
would cause profit to fall up to 40% in the just-ended financial
year as Chinese consumers continue to shy away from the French
drinks maker's expensive cognac amid a crackdown on corruption.
Rémy Cointreau said operating profit for the fiscal year ended
March 31 is expected to fall 35% to 40%, nearly twice as much as
the company previously expected.
Sales for Rémy Cointreau's high-end cognacs have tumbled since
Chinese President Xi Jinping last year launched an anticorruption
drive that dented a long-standing tradition of gift-giving and
fancy dining in the country.
While rivals such as Pernod Ricard SA and Diageo PLC have also
suffered, Rémy Cointreau has been hit particularly hard as about
70% of its profits depend on Rémy Martin cognac, for which China
had been the key sales booster.
Rémy Cointreau has refused to cut prices in response to the
sales drop. It is convinced the Chinese market will pick up again
and has continued to invest in its brands in China while reducing
its high inventory levels, which has hit profits.
The situation hardly improved in the latest quarter, even during
the crucial Lunar New Year celebrations.
Sales in the three months ended March 31 fell to 186 million
euros ($257 million) from EUR228.8 million a year earlier. Organic
sales--which strip out currency swings, acquisitions and
disposals--fell 16.1%, dragged down by a more than 30% drop at Rémy
Martin.
Write to Ruth Bender at Ruth.Bender@wsj.com
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