Tuesday, 21 January 2014

Remy Cointreau: morality promotion, headwinds...and opportunities

After the management change at Remy Cointreau in early January (discussed here) now some of the rationale for this switch.  Whatever way you look at it, an organic decline of over 18% in Remy Martin sales during the nine months to the end of 2013 is poor.

As discussed in my previous postings on the company, China stands at the centre of the trading issues.  At the moment the company sees little relief:

'The campaign to promote morality in China is expected to continue to adversely affect the consumption of ultra-premium products and no significant recovery can be expected due to the Chinese New Year'

Additionally the confirmed that 'as previously announced' that China slowed down more in the last full quarter. 

Clearly the market did not perceive this news was fully previously announced and, in early trading, pushed the shares down around 4%.  Whilst the price action looks weak, the rate of decline is starting to abate.  This befits a share trading close to its three year lows. Risk-reward is ever-improving. 

Additionally, it is worth noting the comment about trading in the rest of the world outside China:

'Over the period as a whole, the US and Japan recorded genuine growth, whilst Europe continued to be resilient'

As 2014 rolls on the comparisons for Remy Cointreau's China business will get easy and easy.  The gifting crackdown in China may not have a finish date yet but as the stock market looks forward, Remy Cointreau's shares become more interesting.  I added to my starter position established in late December, and augmented in early January, today. 

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