- Pernod declines to comment on merger talks with Brown-Forman
- Company reports better than expected Q3 sales
- Expects full year sales to decline by 3-4% due to impact on travel retail from Iran war
PARIS, April 16 (Reuters) - Pernod Ricard, which is in talks to merge with U.S. rival Brown-Forman, reported a stronger-than-expected 0.1% rise in third-quarter sales but warned the decline in tourism due to the Iran war would hurt its travel retail business and impact full-year sales.
The second-largest Western spirits group behind Diageo said it expected group organic net sales to decline by 3% to 4% in the current fiscal year that started July 1; its shares fell 1.7% at 0819 GMT.
Pernod is the latest company to report a significant hit to sales due to the conflict in the Middle East, after France's luxury groups all pointed to weaker sales in the first three months of the year following a sharp slowdown in shopping in the region.
Duty-free stores selling premium perfumes and spirits are also feeling the pain from shuttered airports and curbs on travel to the region.
Travel retail accounted for 6% of Pernod's net sales in 2025.
The maker of Martell cognac and Absolut vodka reported sales of 1.95 billion euros ($2.30 billion) in the three months to March 31, a like-for-like rise of 0.1%.
This compared with average expectations of a 0.7% decline in a company-compiled poll of analysts.
The performance was an improvement from a 5% contraction in the second quarter as markets in India and global travel retail sales improved, offsetting persistent weakness in consumer demand in the U.S. and China, where sales fell 12% and 7%, respectively.
The company also reaffirmed guidance of between 3% and 6% sales growth between 2027 and 2029 despite an industry-wide slump in alcohol demand.
Spirits companies are battling a multi-year slump in sales that has prompted valuations to slide, CEOs to exit and companies to sell assets and cut costs. In the key U.S. and Chinese markets, sales have dropped amid tariff threats, destocking and a sluggish Chinese economy.
Pernod is in merger talks with Brown-Forman, which would create the world's No. 2 spirits maker by sales behind London-based Diageo, saving the combined company as much as $450 million a year and helping offset the decline in alcohol consumption, say analysts.
However U.S. spirits group Sazerac has also offered to buy Brown-Forman for about $15 billion, a source familiar with the matter said on Wednesday, complicating the talks.
Pernod finance chief Helene de Tissot told analysts on a call on Thursday that talks were ongoing, but the company would make no further comment on the matter.
"The underlying business is recovering, however, debate today will be around the potential Brown-Forman tie-up and capital discipline given competitive tension from Sazerac with a rival bid for $15bn," Jefferies analysts said in a note.
($1 = 0.8467 euros)
Reporting by Dominique Vidalon; Editing by Dominique Patton, Kim Coghill and Thomas Derpinghaus
Source: Reuters