Pernod Reports Solid First-Quarter Fiscal-Year 2023 Sales, but Growth Begins to Slow

Pernod Ricard posted strong first-quarter 2023 sales that were again slightly ahead of our estimates and that support our thesis that the company is comfortably passing through enough price increases to offset cost inflation. We reiterate our EUR 167 fair value estimate and wide moat rating. First-quarter organic sales growth of 11% was very strong, but it was boosted by the continued reopening of markets in Asia, where revenue grew 20% organically. Sales in Europe (up 4%) and the Americas (up 6%) were more in line with our long-term growth assumptions, and we think sales could remain at a slightly subdued level as the impact of higher mortgage rates, energy prices, and broader inflation begin to bite. We remain concerned that operating profit growth could slow next year, and with the shares trading at 19 times fiscal 2023 earnings, the pullback in the market price means the shares are now fairly valued.