PARIS (Reuters) - French spirits group Remy Cointreau said its first-quarter sales fell 5.7 percent year-on-year, hit by sluggish trading in Western Europe and by a Chinese government crackdown on ostentatious spending that sapped demand for premium cognac.
However, the decline - which was largely prompted by de-stocking in China - was less severe than in the previous quarter, and weakness in the country was partially offset by robust demand in the United States.
Cognac accounts for 80 percent of the company's operating profit, with China contributing half of cognac profits.
Remy Cointreau's focus has been on deluxe drinks like Louis XIII cognac, which sells for 2,500 euros (1,988 pounds) a bottle. This has made making it more vulnerable to China's anti-corruption crackdown on gift-giving and personal spending by civil servants than rivals such as Diageo and Pernod Ricard
Remy Cointreau said on Friday that group sales reached 214.8 million euros in the three months to June 30. The like-for-like year-on-year sales decline was 5.7 percent, against 16 percent in the fourth quarter of fiscal year 2013/14.
"Over the period the group continued its de-stocking efforts in Asia, consistent with the consumption trends observed in this market," the company said in a statement.
Cognac sales alone slumped 15 percent year-on-year in the first quarter, having fallen 32 percent in the previous three months.
The maker of Remy Martin cognac and Cointreau liqueur said it still aimed to achieve organic growth in sales and in current operating profit in its 2014-15 financial year which began on April 1.
On the bright side, the liqueurs and spirits division recorded an 11.3 percent rise in like-for-like sales, bolstered by solid demand for Cointreau in Japan, Eastern and Central Europe and in travel retail.
(Reporting by Dominique Vidalon; Editing by Pravin Char)