Remy Cointreau’s stock took a sharp hit, falling nearly 8.5% on Tuesday after China announced new anti-dumping tariffs on European brandy imports.
However, this is just one of the problems plaguing the French alcohol maker.
Broader issues, including weak demand in key markets and fierce competition, have been weighing heavily on its performance, making the stock struggle over the past year.
China imposed provisional tariffs of 30.6% to 39% on European brandies following the European Union’s decision to impose duties on Chinese-made electric vehicles.
This move triggered a decline in the shares of several European spirit producers, including Remy Cointreau, Pernod Ricard, LVMH, and Diageo.
While most companies saw a drop between 1% and 4%, Remy Cointreau suffered the steepest fall, highlighting its vulnerability to external pressures.
Remy Cointreau’s stock has been in decline for some time.
Over the past year, the share price has dropped nearly 45%, with a 35% decline in just the past six months.
In contrast, its competitor Pernod Ricard has experienced less dramatic losses, down 19% over the past year and 12% in the last six months.
Both UBS and Citi revised their outlooks for the company on Tuesday.
Citi lowered its price target from €120 to €115, maintaining a Buy rating, while UBS cut its target from €93 to €71 and maintained a neutral stance.
Meanwhile, Oddo BHF reiterated its “outperform” rating but reduced the target price from €95 to €90.
Remy Cointreau stock: what’s driving its struggles?
Several factors contribute to the bearish outlook for Remy Cointreau.
In the US, the company is still grappling with inventory adjustments, with no strong recovery in sell-out trends.
The Asia-Pacific (APAC) region, particularly China, has faced headwinds, while the Europe, Middle East, and Africa (EMEA) region has seen intensified competition, resulting in weaker performance.
Key concerns for investors include sluggish US sales for Cognac and Liqueurs & Spirits, challenging economic conditions in China, and uncertainties surrounding potential government stimulus measures that may take time to materialize.
Additionally, France’s proposed legislative changes could raise corporate taxes, further adding to the company’s challenges.
The company’s financial performance reflects these struggles.
As of Q4 2024, Remy Cointreau reported a 22.89% revenue decline over the past twelve months and an 18.2% quarterly drop in Q4.
The Mid-Autumn Festival in China, a key sales period, also failed to meet expectations, compounding the difficulties in the Chinese market.
Can Remy Cointreau stock bounce back?
Despite the headwinds, Citi remains optimistic about Remy Cointreau’s long-term prospects, calling it the stock with the “greatest absolute upside” in its coverage universe over the next two to three years.
The company’s gross profit margins, at 71.19%, suggest it still retains strong pricing power for its premium spirits.
Oddo BHF also sees potential for a recovery in the spirits market, noting that Remy Cointreau and Diageo are well-positioned due to their exposure to the US and China.
However, it warned that the timing of such a recovery remains uncertain, and short-term performance is likely to remain under pressure.
For now, Remy Cointreau must navigate significant challenges, including weak sales, external competition, and macroeconomic uncertainties, with any meaningful recovery likely delayed until market conditions improve.
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