Pernod Ricard has reported “difficulties” in Asian travel retail in its full-year 2016 results, with sales declining.
The company said this was largely due to domestic market weakness, particularly in China and Korea, and currency fluctuations. The sales decline was driven by the company’s Scotch portfolio, in what the company called a “tough commercial and competitive environment” in the region.
Travel retail sales in the Americas were down -9% in what the company described as a “difficult year” due to Brazil’s continuing economic struggles and the appreciation of the US Dollar. The sales decline was mainly volume-led, in particular on Chivas Regal whisky and Absolut vodka, with “some negative pressure on pricing but positive market and quality mix”, according to Pernod Ricard.
There was also a “small” decline in travel retail sales in Europe. Pernod Ricard noted “a context that remains difficult” and said the Russian situation and Ruble devaluation had continued to impact commercial performance.
The company created a new Global Travel Retail division earlier this year, reporting directly to headquarters. Mohit Lal was named Chairman & CEO of the division.
Overall sales at Pernod Ricard were up +1% year-on-year to €8.68 billion, mainly due to growing revenues from the US and Spain. On a like-for-like basis sales were up +2%. However sales in China fell -9%.
The group reported profit from recurring operations of €2.28 billion in the year to 30 June, with organic growth of +2% reported. The result was in line with forecasts.
The company said it was planning to cut costs by €400 million by fiscal 2020.
Chairman and Chief Executive Officer Alexandre Ricard commented: “FY16 was a solid and encouraging year, delivering profit from recurring operations in line with guidance while maintaining investment and implementing significant initiatives to deliver our medium-term strategy and objectives.
“For full year FY17, in a contrasted environment, we expect to continue improving our business performance year-on-year versus FY16, supporting priority markets, brands and innovations and focusing on operational excellence. As a consequence, our guidance for FY17 is organic growth in profit from recurring operations between +2% and +4%.”
