Pernod Ricard reported a 14.2% sales drop after weakness hit its largest markets

Pernod Ricard reported Thursday that sales fell sharply in the fiscal year ended June 30, as weak demand in the United States and China, brand disposals, and currency moves cut into revenue and profit, while India became a brighter spot for the French spirits group.

The company said net sales fell to €9.404 billion from €10.959 billion a year earlier, a drop of €1.555 billion, or 14.2%. Pernod Ricard said the decline came from three separate sources. Its organic sales, which strip out currency and portfolio changes, fell 3.9%, equal to roughly €405 million. Changes in group structure, mainly brand disposals, reduced sales by €582 million. Currency effects cut another €568 million, mainly because of moves in the U.S. dollar, Indian rupee, and Turkish lira.

Net profit attributable to the group fell to €1.203 billion from €1.626 billion, down €423 million, or 26%. Profit from recurring operations dropped to €2.423 billion from €2.951 billion, a reported decline of 17.9%. Gross margin narrowed to 58.4% from 59.5%, a decrease of 1.1 percentage points, as softer pricing, a less favorable market mix, tariffs, and inflation in production costs weighed on profitability. The company said those pressures were only partly offset by cost savings from its efficiency program.

The weakest large market was the United States, where sales fell 14%. Pernod Ricard said the U.S. spirits market slowed as economic growth moderated and consumer confidence stayed subdued. It also said sales were hurt by inventory adjustments in the trade, even though sell-out trends improved during the year. China was also weak, with sales down 19%, which the company linked to a difficult economic backdrop, weak consumer sentiment, and regulatory measures that hurt demand, especially in prestige categories such as cognac.

India moved in the opposite direction. Sales there rose 7%, and Pernod Ricard said India has now overtaken China as its second-largest market. The company pointed to strong consumer demand, premiumization, and market-share gains. Local whisky brands such as Royal Stag and Blenders Pride performed well, while imported brands including Jameson, Ballantine’s, and Chivas Regal also grew. Pernod Ricard said its board is studying a possible initial public offering of its Indian subsidiary, but the plan remains under review.

Across regions, sales in the Americas fell 10%, Europe declined 3%, and Asia and the rest of the world were flat overall. Within those broad figures, Canada posted solid growth, Brazil recovered in the second half after a methanol crisis, and Mexico fell sharply. In Europe, France, Spain, and Germany declined, while Eastern Europe continued to grow. The company also said sales in the Middle East were hit in the fourth quarter by regional conflict, a factor it expects will also weigh on the first quarter of fiscal 2027.

The performance of Pernod Ricard’s key brands showed both weaker volumes and weaker mix. Strategic international brands posted an organic sales decline of 4%, made up of a 1% drop in volume and a 3% deterioration in price or mix. Martell fell 12%, with volumes down 5% and price or mix down 7%. Havana Club dropped 20%, with volumes down 16% and price or mix down 4%. Jameson recorded a low-single-digit decline globally, though it continued to grow strongly outside the United States, especially in India and parts of Africa. The group’s ready-to-drink business was one of the few areas of clear growth, rising 12%.

Even with the full-year decline, Pernod Ricard said sales improved as the year progressed. Organic sales fell 5.9% in the first half, then only 1.3% in the second half. That easing, however, was not enough for the company to give an upbeat near-term forecast. For fiscal 2027, Pernod Ricard said it expects organic net sales to be broadly stable in what it called a mixed and uncertain environment. It said both the United States and China are likely to remain down, with U.S. inventory adjustments continuing from the first quarter and only gradual improvement expected in China.

The company also lowered the tone of its medium-term outlook. For fiscal 2027 through fiscal 2029, Pernod Ricard said it now expects average organic net sales growth to be close to the lower end of its 3% to 6% target range, citing continued softness in the U.S. market. That signals that management does not expect the United States, long one of its most important profit engines, to provide the same support for growth over the next several years. Outside the United States and China, the company said fiscal 2026 organic sales were up 0.5%.

Management said it is trying to protect margins by accelerating a €1 billion operational efficiency plan that is now expected to be fully delivered by fiscal 2028. Structure costs fell 8.0% in the year, following a 4% reduction in fiscal 2025. Advertising and promotion spending fell to 15.0% of net sales from 15.3%, though Pernod Ricard said it plans to keep that ratio near 16% in fiscal 2027 while continuing to invest in digital transformation.

Cash flow held up better than earnings. Free cash flow rose 6% to €1.197 billion, supported by stronger working capital management and lower capital spending. Cash conversion improved by 17 percentage points to 91%. Net debt fell by €65 million to €10.662 billion, although the net debt-to-EBITDA ratio rose to 3.7 times from 3.3 times because operating profit declined. The company proposed a dividend of €4.70 per share, unchanged from the previous year, subject to shareholder approval in November, with the final €2.35 payable in cash or shares.

Pernod Ricard said the annual accounts have been through audit procedures, but the statutory auditors’ final report had not yet been issued. It also said the organic growth figures it uses are non-IFRS measures that exclude currency swings, acquisitions, disposals, and some other items, which means they are company-defined indicators rather than standard accounting measures.