Muted Cheer for Pernod Ricard as U.S. and China Sales Decline in First Quarter

French spirits maker Pernod Ricard (PERP.PA) said on Thursday that sales fell sharply across nearly all major markets in the first quarter, as global tariffs and weak economies added to pressure on the struggling spirits industry.

The world’s second-largest Western spirits group after Diageo (DGE.L) reported a 7.6% drop in quarterly sales, slightly worse than expected, blaming soft consumer demand and destocking in China and the United States. Despite the decline, the company said it remains optimistic that sales will recover over the course of its current financial year ending June 30, 2026.

Pernod expects an improvement in sales trends in the second half of the year, supported by higher cognac sales through duty-free channels and an easier year-on-year comparison base.

CEO Alexandre Ricard told Reuters in an interview that while sales fell 27% in the U.S. and 16% in China, both markets are expected to show “less severe declines” ahead.

“In China, you should see improvement from minus 27%, even if it remains negative,” Ricard said. “And I would say pretty much the same thing for the U.S.”

Pernod’s shares, which had already priced in a weak quarter, were up 1.2% at 0911 GMT.

Bernstein analyst Trevor Stirling said the market was likely relieved that “underlying consumer demand in China and the U.S. wasn’t as bad as the headline numbers suggested.”

The post-pandemic boom in spirits sales has sharply reversed, hitting the entire industry. The slowdown has been worsened by China’s restrictions on cognac imports and new tariffs on European goods entering the U.S.

While some investors believe changing social habits and reduced alcohol consumption could lead to a long-term decline, industry executives argue that the current weakness is driven mainly by economic headwinds, not lifestyle shifts.

Chief Financial Officer Hélène de Tissot told investors that the company is performing in line with competitors in the U.S., and that sales in China — though subdued around the Mid-Autumn Festival — showed stronger underlying momentum than the previous quarter.

Pernod is also counting on a rebound in India, its second-largest market, later this year as the impact of a sharp excise tax increase in Maharashtra, the country’s second most populous state, fades.

To manage costs, the company has launched a restructuring plan aimed at improving efficiency. In February, Pernod said it expects to save around €1 billion between the 2026 and 2029 financial years through operational improvements.

(€1 = $1.1654)