Pernod Ricard announced a 2.1% decline in sales for the first nine months of fiscal year 2020 and a 14.5% drop for the quarter in its Q3 earnings report yesterday, as the impact of the COVID-19 pandemic has begun to hit the spirits conglomerate’s bottom line.
U.S. sales grew 3% in the quarter, driven by Jameson, The Glenlivet, Malibu and specialty brands. However, sales began to slow in March after most of the country implemented social distancing measures, including closing bars, restaurants and venues. Jameson in particular was hurt by the cancellation of St. Patrick’s Day events nationwide. While the closure of on-premise service has had a significant impact on sales, liquor stores have helped to offset the loss through sharp “pantry load” sales spikes as consumers stockpile alcohol.
In a press release, chairman and CEO Alexandre Ricard said the company has confirmed its guidance that the pandemic will lead to a 20% decline in profit from recurring operations for the full fiscal year. However, he noted it is currently implementing a plan to “mitigate costs and tightly manage cash,” including the suspension of up to $538 million (€500 million) in share buybacks.
The company has also cancelled advertising and promotional spending “where no longer relevant,” enacted hiring and travel expense freezes and has adjusted strategic investments “to protect long term growth,” according to the report.
“Our business model and strategy are resilient,” said Ricard. “Performance in [the first half of the fiscal year] through the start of Q3 was solid, thanks to the implementation of our Transform & Accelerate strategic plan. Since then, the COVID-19 pandemic has led to a significant deterioration of the environment across the globe.
“I am confident in Pernod Ricard’s ability to bounce back from today’s challenges to achieve its growth potential,” he added.
The impact of the novel coronavirus has been most hard felt in China (down 11%) and in global travel retail (down 13% for the fiscal year to date and 38% for Q3), according to the report. In China, where the outbreak began, Pernod Ricard has begun to see a slow recovery as businesses begin to reopen while two brands — Absolut and The Glenlivet — have proved “resilient” in face of the virus. Meanwhile, global travel channels have been in “severe decline” since February when international consumers began taking precautions against the virus.
Pernod Ricard’s core portfolio of international brands (including Jameson, The Glenlivet, Malibu, Beefeater and Royal Salute), which accounted for 64% of all sales, is down 2% for the fiscal year to date, compared to up 8% at the same time last year.
The localized brands portfolio (19% of total sales), which features Imperial Blue and Olmeca among others, grew just 1% in the period, compared to 10% growth last year. Specialty brands (4% of total sales) was up 13% compared to 14% in the previous year while wine (5% of total sales) declined 3%, versus a 5% drop last year.
Like many alcohol producers, Pernod Ricard has begun manufacturing hand sanitizer at all of its U.S. production facilities, as well as at other global sites. The company has already produced over 300,000 liters of sanitizer in the U.S. and has partnered with the New York police department to distribute the product to healthcare providers and people in need.
At press time, Pernod Ricard’s stock was down 0.42% to $29.50 per share.