Cognac-maker Remy flags deeper than expected annual sales fall

By Dominique Vidalon and Emma Rumney

PARIS/LONDON (Reuters) -Remy Cointreau told investors to lower their annual sales expectations for the third time in four months on Wednesday, flagging a "marked decline" in China and ongoing problems in the United States, which is threatening tariffs.

The French group's shares fell by 3.4% even though it reported third-quarter sales fell less than expected, supported by cognac, its core product.

The maker of Remy Martin cognac and Cointreau liqueur stuck to its full-year guidance for a sales decline of between 15% and 18% but said it would be "close to" 18%, against analyst expectations of a 16.9% drop.

"Trends in the fourth quarter will be decisive," it said in a statement.

In the midst of steep and persistent sales declines, Remy already cut full-year guidance in October and warned in November of a deeper decline than investors had expected.

This compounded share losses, with Remy stock down some 50% since last January. Its price-earnings ratio has also seen steep declines.

Investors were left hoping for evidence that trends were improving, said John Moore, senior investment manager at Remy shareholder RBC Brewin Dolphin, adding Remy's confidence in higher growth long-term was reassuring.

"We're likely to be waiting for that for a period of time, but not forever," he said.

Remy makes some 70% of its sales from cognac, mostly in the U.S. and China.

In the United States, where high interest rates, inflation and heavy competitor promotions have cut revenues, Remy suffered another double-digit drop in sales.

Finance chief Luca Marotta said a recovery in U.S. cognac sales was unlikely until beyond the fourth quarter.

The company also saw a "marked decline" in China amid a slow economy. Trading around the Chinese New Year holiday was subdued and its timing would negatively impact Q4 sales, Marotta said.

Overall, Marotta said Remy expected trends to improve slightly versus the third quarter.

In addition, the company faces tariffs in China and possible U.S. levies.

($1 = 0.9579 euros)

(Reporting by Dominique VidalonEditing by David Goodman and Barbara Lewis)