Pernod Ricard reported a 3% decline in organic net sales but exceeded consensus with a 64 basis point operating margin expansion in fiscal 2025. Shares rose 8% intraday. Despite challenges in the US and China, the company saw growth in other markets and flagship brands, with organic sales up 1% excluding the US and China.

Pernod Ricard has focused on cash generation, portfolio streamlining, and cost savings during the spirits’ cyclical downturn, supporting its bottom line in fiscal 2025. Asset disposals are expected to boost profitability in fiscal 2026. The company anticipates a transition year in 2026, with improving sales trends in the second half despite challenges in China and India.

Management projects organic net sales growth of 3-6% from 2027 to 2029, with margin expansion supported by a cost-efficiency plan aiming for EUR 1 billion in savings. Despite near-term market concerns, Pernod Ricard’s diversified portfolio and geographic presence position it well for long-term success. Morningstar views the stock as undervalued and maintains a fair value estimate of EUR 121 per share.

Read more at Morningstar: Optimism Over Top-Line Growth Despite US and China Woes