Boozed Ego

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What's going on?

Pernod Ricard’s going to regret this in the morning: the French alcohol giant – owner of Absolut vodka and Jameson whiskey – reported a huge profit hit on Wednesday.

What does this mean?

You might feel as though you’ve been knocking back more liquor than ever in your own home, but spending in two less-frequented areas – bars and duty-free stores – took a double-measure-sized dent last quarter. The drop in sales to nearly non-existent air travelers was so steep, in fact, that Pernod ”wrote down” its value by $1.2 billion. In other words, it reassessed the value of its various parts and realized they – or more specifically, former window-shopper staple Absolut – were worth less than before. And that write-down saw profit for the year through June fall 77%, with sales in the COVID-ravaged final quarter sliding by a third.

Why should I care?

For markets: Claims to fame.
Pernod also had a headache in the form of a pre-pandemic booze industry trend: drinkers’ growing preference for smaller “craft” brands like Redbreast whiskey and Altos tequila over household names like Martell cognac. Sales of those specialty labels climbed 7%, while every other category fell. It’s this shift that pushed Britain’s Diageo – Pernod Ricard’s even bigger rival – to slam down $1 billion for George Clooney’s Casamigos tequila in 2017, and then follow up last month with $610 million for a gin brand part-owned by Ryan Reynolds.

Zooming out: That’s the spirit.
Pernod’s results might’ve looked worse for wear, but the company’s profit didn’t decline as much as it’d forecast in July, helping its shares climb almost 3%. Another struggling company pulled off the same trick on Wednesday: US department store operator Macy’s saw its shares rise after reporting a not-quite-as-dire-as-expected quarterly loss. And while Pernod may be desperate for a return to normal life, Macy’s has spotted a silver lining: people are buying more jewelry and perfume as gifts now there aren’t as many concert tickets and cookery courses on offer.

Originally posted as part of the Finimize daily email.

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