By Dominique Vidalon
PARIS, April 16 (Reuters) - Pernod Ricard, which is in talks to merge with U.S. rival Brown-Forman, reported a stronger-than-expected 0.1% rise in sales for the third quarter but warned the decline in tourism due to the war in Iran would hurt its travel retail business and impact full-year sales.
The second-biggest Western spirits group behind Diageo, Pernod Ricard said it expected group organic net sales to decline by between 3% and 4% in the current fiscal year that started July
1.
It is the latest company to report a significant hit to sales from the conflict in the Middle East, after France's luxury groups all pointed to weaker sales in the first three months of the year following a sharp slowdown in shopping in the region.
Duty-free stores selling premium perfumes and spirits are also feeling the pain from shuttered airports and curbs on travel to the region.
Travel retail accounted for 6% of Pernod's net sales in 2025.
The maker of Martell cognac and Absolut vodka reported sales of 1.95 billion euros ($2.30 billion) in the three months to March 31, a like-for-like rise of 0.1%.
This compared with average expectations of a 0.7% decline in a company-compiled poll of analysts.
The performance was an improvement from a 5% contraction in the second quarter as markets in India and global travel retail sales improved, offsetting persistent weakness in consumer demand in the United States and China.
The company also reaffirmed guidance of between 3% and 6% sales growth between 2027 and 2029 despite an industry-wide slump in alcohol demand.
Spirits companies are battling a multi-year slump in sales that has prompted valuations to slide, CEOs to exit and companies to sell assets and cut costs. In the key U.S. and Chinese markets sales have dropped amid tariff threats, destocking and a sluggish Chinese economy.
Pernod did not comment in a statement on the ongoing merger talks with Brown-Forman, which would create the world's No. 2 spirits maker by sales behind London-based Diageo.
Analysts say it could save the combined company as much as $450 million a year, helping offset the decline in alcohol consumption from pandemic-era highs. Over the last five years, shares of the two companies have both lost roughly 60% of their value.
U.S. spirits group Sazerac has also offered to buy Brown-Forman for about $15 billion, a source familiar with the matter said on Wednesday, complicating the talks.
($1 = 0.8467 euros)
(Reporting by Dominique Vidalon; Editing by Dominique Patton and Kim Coghill)
