Pernod Ricard: Fiscal 2025 Guidance Maintained Following Soft Sales

We maintain our EUR 121 fair value estimate for Pernod Ricard after the firm reported its third-quarter fiscal 2024 trading update, slightly below our estimates. Sales were soft in the quarter due to ongoing weakness in China and Europe, as well as temporary setbacks in India. Management maintained their fiscal 2025 guidance, including a low-single-digit decline in organic net sales and maintained operating margin. This outlook, which is akin to our forecasts, incorporates potential hits from tariffs. Similar to LVMH and Remy Cointreau, Pernod Ricard is exposed to United States import tariffs and Chinese import tariffs on cognac. Distillers often get caught in the crossfire of trade wars and leading firms have a proven history of successfully mitigating tariff hikes. Therefore, we don't expect a material long-term impact. However, our largest uncertainty lies in the timing of a recovery in the spirits industry. Shares were flat following the release and we continue to view the stock as undervalued.