New Remy CEO targets growth after cost cuts cushion profit drop

By Dominique Vidalon and Emma Rumney

PARIS/LONDON (Reuters) -Remy Cointreau's new CEO outlined a series of strategic changes on Thursday, including lowering prices to sell more cognac, and said the worst was over for the embattled French spirits maker in its key U.S. market.

The Remy Martin cognac and Cointreau liqueur maker said its first-half operating profit fell by less than expected, and CEO Franck Marilly promised a return to growth in the second half.

He also spelled out a plan that shifted focus to reviving volumes rather than preserving profits through high prices.

Remy's shares rose by 6% before falling back to stand 2.5% higher at 39.06 euros at 1115 GMT.

The stock has tanked since 2023, losing more than 70% of its value amid years of steep sales declines, repeated cuts to sales forecasts and the scrapping of 2030 sales targets due to downturns in its major markets in the United States and China.

'START OF A NEW ERA' 

Marilly said the first six months had been challenging, but marked the "start of a new era" for Remy.

"It is clear a transformation is needed," he told investors during his first results presentation since taking over in June, outlining a growth plan he said would be fleshed out next year.

He said Remy had been too dogmatic on price in the key U.S. market in particular, where stretched consumers have turned away from cognac, and especially Remy's brands as rivals undercut it.

While the worst was over in the U.S., Marilly said Remy would pursue lower prices even though it would hurt its profit margin, adding that reviving volumes was the number one priority and even small changes could make a difference.

Remy would also look to improve cash generation, including by reviewing its brand portfolio, make advertising and promotion spend more effective and develop new markets, he said.

Barclays analyst Laurence Whyatt said it was clear Remy's management wanted to broaden its appeal by targeting a wider demographic and emerging markets.

However, this raised questions about Remy's brand positioning, Whyatt said, adding: "Overall, we think this points to gross margins being under pressure going forward". 

(Reporting by Dominique Vidalon; Editing by Alessandro Parodi, Christopher Cushing, Louise Heavens, Conor Humphries and Alexander Smith)