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Remy seeks to fix US inventory problems by year-end, profits fall

A bottle of Cointreau is displayed at the Carre Cointreau in the Cointreau distillery in Saint-Barthelemy-d'Anjou

By Dominique Vidalon and Emma Rumney

PARIS (Reuters) -Remy Cointreau aims to end the year with a "sound" level of stock in the United States, but it is unclear when this would start to move, its CEO said after the group reported a 43% fall in first-half operating profit.

High levels of unsold inventories in the U.S. have become a key issue for the maker of Remy Martin cognac and Cointreau liqueur after they contributed to a cut in full-year guidance in October. The U.S. and China are the group's two key markets for cognac.

U.S. sales have fallen as retailers and wholesalers try to clear their elevated inventories following a post-pandemic boom for Remy.

Chief executive Eric Vallat told journalists the group still had around five months' worth of stock in the United States, and while demand was improving it was unclear when sales from wholesalers to retailers would pick back up.

"The goal is to end the year with sound stocks," he said, adding this would mean around three or four months' worth.

While some rivals are heavily discounting their lower-end products, Remy had no plans to cut prices of its cheaper cognacs, Vallat said, but also said that some promotions were planned.

In China, Vallat said sales were picking up "very fast". But he added that Remy expected sharp destocking in the third quarter, before a recovery in the fourth.

Remy's shares were down slightly at 0950 GMT, eroding an earlier gain of 3%.

The group's first-half operating profit fell 43%, in line with analyst expectations.

Out of a 100 million euro ($109.47 million) cost-cutting plan announced in October, Remy said it had so far achieved 25 million euros.

Charles de Riedmatten, fund manager at Myria AM, a Remy investor, said this was low and Remy could struggle to control its marketing costs.

"For H2, I will be really cautious," he said, adding the U.S. market in particular remains difficult and its not clear when it will improve.

Remy reiterated its full-year forecast, saying the U.S. would not see growth in sales before the next financial year.

($1 = 0.9135 euros)

(Reporting by Dominique Vidalon in Paris and Emma Rumney in London, Editing by Charlotte Van Campenhut, Varun H K and Tomasz Janowski and Jane Merriman)