Pernod Ricard reported a 3.9% organic decline in net sales for fiscal 2026, totaling €9.4 billion, as weak performance in the U.S. and China weighed on results despite sequential improvement in the second half. Shares fell 5.83% to $63.66 following the presentation.
The company cited a "contrasted environment," with headwinds in its two largest markets partially offset by operational discipline. U.S. net sales, representing 17% of the total, dropped 14%, while China, 7% of sales, fell 19% due to macroeconomic challenges and subdued consumer confidence. The Middle East, 1% of sales, plummeted 29% amid regional conflicts affecting domestic and travel retail. Collectively, these regions accounted for roughly a quarter of net sales.
Growth was concentrated in other markets, where the top 16 excluding the U.S. and China delivered a 0.5% organic increase in net sales. Turkey surged 26%, Nigeria grew 18%, Japan expanded 8%, and India achieved 7% growth. Approximately 40% of net sales were in growth categories during the year.
Profit from recurring operations declined 5.2% organically to €2.42 billion, with a reported drop of 17.9% due to adverse currency effects totaling €268 million, primarily from the U.S. dollar, Indian rupee, and Turkish lira. Operating margin compressed 35 basis points organically to 25.8%, while earnings per share fell 19% to €5.85. Gross margin headwinds of 221 basis points were driven by negative price/mix, adverse market mix, and tariff impacts, partially offset by improved marketing efficiency and an 8% reduction in structure costs.
Pernod Ricard accelerated its €1 billion efficiency program, achieving €500 million in savings in FY26 and advancing full completion to fiscal 2028. The program targets cumulative savings of €1.9 billion across procurement, manufacturing, supply, and portfolio management by FY28. Organizational simplification reduced headcount by 18% since June 2023, with structure costs down 8% organically in FY26. Marketing efficiency improved, with digital media return on spend scoring 136, a 75% increase over traditional media.
Free cash flow rose 6% to €1.2 billion, with a cash conversion ratio of 91%, exceeding the 80% target. Net debt declined by €65 million despite €1.23 billion in dividend payments, supported by strong cash generation and €389 million from disposals, including the sale of Imperial Blue. The net debt to EBITDA ratio increased to 3.7x from 3.3x, with a target to fall below 3x by FY29.
For FY27, Pernod Ricard expects broadly stable organic net sales, with continued pressure in the U.S. and China offset by improving trends elsewhere. Medium-term guidance projects organic net sales growth averaging near the lower end of the 3% to 6% range through FY29, supported by margin expansion and disciplined capital allocation.
