Shares in French spirits group Pernod Ricard rose by more than 5.7% on Thursday after the company reported a smaller-than-expected fall in annual sales and profit, while offering guidance that pointed to improving trends in the latter half of fiscal 2026.
The performance was received positively by investors, who had braced for a deeper slowdown amid weak demand in key markets.
Tariff impact revised lower to €80 million annually
The company said it now expects tariffs imposed by the United States and China to cost around 80 million euros ($93.7 million) each year, down from an earlier estimate of 200 million euros.
Chief Executive Alexandre Ricard told Reuters that the group, nonetheless, expects fiscal 2026 to deliver an improvement over 2025, although it is too early to quantify the extent of the recovery.
“We will do better for the year than this year,” Ricard said.
The outlook emerges as the French distiller continues to navigate trade disputes, particularly between China and the European Union, while also adapting to new tariff announcements from the United States.
Full-year results slightly ahead of expectations
For the year ended June 30, Pernod Ricard reported sales of 10.96 billion euros, a 3% organic decline.
The figure was marginally better than the 3.2% drop analysts had forecast in company-compiled consensus and in line with its guidance for a low single-digit decline.
Profit from recurring operations fell 5.3% to 2.95 billion euros, reflecting weaker volumes and tariff pressures, while net profit rose 11% to 1.67 billion euros on reduced costs.
The board proposed an unchanged dividend of 4.70 euros per share.
Transition year ahead with a weak start expected
The group, maker of Absolut vodka, Jameson whiskey, Martell cognac and Havana Club rum, warned that fiscal 2026 would be a transition year.
Management forecasts a soft first quarter, driven by continued destocking in the United States and subdued consumer demand in China, but expects momentum to pick up in the second half.
Like its peers, Pernod Ricard has been hit by a downturn in spirits consumption following a post-pandemic surge.
Analysts note that the operating environment remains tough, particularly in the US and China, the company’s two largest markets.
Will the share price rally sustain? Analysts weigh in
Citi analysts described the outlook for organic sales growth in fiscal 2026 as slightly better than market expectations, noting that investors should take comfort from the earnings beat and strong free cash flow.
“We expect the shares to trade higher,” Citi’s Simon Hales wrote in a research note.
JP Morgan analysts said the results offered a mixed picture, combining a welcome earnings beat with a much weaker set-up into the first half of fiscal 2026.
They, however, cautioned that Thursday’s rally may be difficult to sustain after a strong run since late June.
“The share price is already discounting a muted pace of recovery in F26, as confidence in recovery increases, we expect the shares to re-rate,” Jefferies analyst Edward Mundy and associate Sebastian Hickman wrote in a research note.
They added that the company is doubling down on cost-cutting efforts, which helped it beat earnings expectations, noting this should support the share price.
RBC Capital Markets offered a more guarded assessment, highlighting management’s ambiguous pledge to defend operating margins “to the fullest extent possible.”
The brokerage suggested that this could imply a decline in profitability in the near term.
Shares rally, but challenges remain
The Paris-listed stock has risen about 23% since late June and is up roughly 5% for the year to date.
Thursday’s jump reflected investor relief that full-year results were slightly ahead of forecasts, and that the tariff hit was smaller than initially feared.
Still, analysts warned that headwinds from weak US and Chinese demand, along with ongoing trade disputes, could weigh on performance in the near term.
Management maintained that the company is positioned for a gradual recovery, with improving sales momentum expected to emerge in the second half of the fiscal year.
The post Pernod Ricard shares climb as sales, profit beat forecasts: will the rally sustain? appeared first on Invezz