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Shares in Remy Cointreau surge on better-than-expected update

(Sharecast News) - Shares in Remy Cointreau jumped on Friday, after the drinks group toasted better-than-expected trading in the third quarter. The French firm said sales in its cognac division - home to Remy Martin and Louis XIII - fell 34% in the three months to December end, on the back of destocking in China and a "persistently sluggish" US market.

The US has been hit by a surge in promotional activity as well as higher interest rates, which has cut distributors' financing capacity. Remy does not expect to return to growth in the US before the 2024-25 full-year.

However, sales in its liqueurs and spirits division, which includes Metaxa and Mount Gay as well as Cointreau, rose 4%. Remy attributed the improved sales performance to the US, where demand for The Botanist gin and Cointreau had been strong.

It also noted a "significant sequential improvement" in the Americas compared to the second quarter, and said destocking in China ahead of the Chinese New Year was temporary.

Group sales fell nearly 24% in the third quarter, slightly ahead of analyst forecasts.

By 1130 GMT, the Paris-listed stock had put on 16%.

Looking to the rest of the year, Remy Cointreau sale the decline in annual sales would come in at the lower end of the guidance range, of 15% to 20% on an organic basis.

But if flagged a "contained" organic decrease in the margin through a cost-cutting programme, which is expected to save around €100m this year.

On a nine-month basis, organic sales fell 23% to €956.6bn.

Jefferies, which has a 'buy' rating on the stock, said: "Sequential improvement in the US is offset by destocking in China. However, this is well understood by the market.

"Remy, in our view, is one of the most attractive long-term growth stories in European beverages, given high barriers to entry and premiumisation trends."

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Important information: This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice. When you are thinking about investing in shares, it’s generally a good idea to consider holding them alongside other investments in a diversified portfolio of assets. Past performance is not a reliable indicator of future returns.

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