Pernod Ricard, the world's second-largest spirits maker, reported fiscal first-quarter net sales of €2.23 billion, about 1.2% below what analysts had expected. The miss was driven partly by divestitures and an unfavorable sales mix, but that didn't stop Berenberg, a German investment bank, from raising its earnings estimates for 2027 and 2028.
Berenberg's move reflects a belief that the company's profit margins will improve as the year progresses, even if the latest sales snapshot was soft. The bank nudged up its earnings per share forecasts by 1.2% for 2027 and 0.9% for 2028, while keeping its price target on the stock at €97.50.
What's behind the sales miss?
The quarter took a €127 million hit from businesses Pernod Ricard has sold, including the Imperial Blue whisky brand and its wine portfolio. Excluding those disposals, the picture was more nuanced: volumes rose 6% year on year, but organic net sales fell 0.9%. The company said pricing was broadly stable, but the "mix" of what it sold and where it sold it shifted in an unfavorable direction.
Mix is a key metric for spirits companies. Selling more premium products in high-margin markets boosts profitability, while selling more entry-level brands or in lower-margin regions can drag on earnings even if volumes grow. Pernod Ricard's mix was negative in the quarter, which weighed on revenue.
Berenberg pointed to softer-than-expected performance in the Americas and Europe, partly offset by strength in Asia and the rest of the world. The bank also flagged inventory drawdowns in the US and China—where retailers and distributors are reducing stock rather than ordering new product—and "pipe-fill" in India, which refers to the initial stocking of new distribution channels.
Why Berenberg is still optimistic
Despite the weak quarter, Berenberg is taking management's view that the mix will improve through the year. The bank's revised forecasts assume organic net sales will dip 0.2% in 2027 before growing 2.4% in 2028. That's a modest outlook, but the earnings upgrades suggest Berenberg sees margin expansion ahead.
For everyday investors, the key takeaway is that analysts are looking beyond the short-term noise. Divestitures and inventory adjustments are often one-off items, and the underlying business—volumes up 6%—still shows demand for Pernod Ricard's brands. The question is whether the company can improve its mix and protect margins in a competitive environment.
What it means for investors
When an analyst raises future earnings forecasts but leaves the price target unchanged, they're effectively saying the stock deserves a slightly lower valuation multiple for those profits. In other words, Berenberg used the upgrade to make the story feel safer—that better product and geographic mix can protect margins—rather than to argue the market should "re-rate" Pernod Ricard higher.
That can cap near-term upside from analysts' models unless the next few quarters show organic net sales coming in stronger than the bank's longer-run assumptions. The US and China are particularly important, as those markets tend to generate the group's fattest margins. If inventory drawdowns there persist, it could weigh on results. But if the mix improves as expected, Pernod Ricard could deliver earnings growth even with flat sales.
For context, other consumer companies have also faced mixed results as they navigate shifting demand and inventory cycles. And analysts often adjust forecasts based on near-term data while keeping longer-term views intact.
Berenberg's move is a reminder that a single quarter's sales miss doesn't necessarily change the long-term story. Investors should watch whether Pernod Ricard can deliver on its mix improvement promise in the coming quarters, especially in its key markets.
