Pernod Ricard: A Tough Year Down 32% Amid a Rising CAC 40

The year 2025 will be remembered as a turning point for Pernod Ricard. By early January 2026, the stock of the world's second-largest wine and spirits company was trading around 72.9 euros, marking a decline of nearly 33% over the past year and a drop of approximately 34% over the entire 2025 calendar year, despite a rising Parisian market. This underperformance was neither due to a sudden accident nor a late downturn, but rather a gradual and continuous deterioration in investors' risk perception, which began at the start of the year.

After trading above 108 euros in early January 2025, the stock quickly entered a downward trajectory. The declines observed in the first quarter were followed by short-lived technical rebounds, never allowing the stock to rebuild peaks. This sequence of descending peaks gradually established a lasting negative trend. The decline witnessed in the fall was not a turning point, but rather the logical conclusion of a movement set in motion several months earlier, reflecting a gradual reevaluation of the company by the market.


Weakened Fundamentals in Key Markets
On a fundamental level, this stock market evolution was fueled by a visible deterioration in activity in key markets. For the fiscal year 2024/2025, Pernod Ricard reported annual revenue of 10.95 billion euros, down 3% organically and 5.5% as reported. This contraction included a negative currency impact of 277 million euros, primarily related to the Turkish lira, Argentine peso, and Indian rupee. The nature of the decline particularly worried investors: sales in China plummeted by 21%, hampered by a challenging macroeconomic environment and persistently weak consumer confidence, while the United States saw a 6% decrease amid a more constrained consumption environment and inventory adjustments among distributors.

The situation further deteriorated at the beginning of the 2025/2026 fiscal year. In the first quarter, sales dropped by 7.6% organically and 14.3% as reported data. The slowdown is particularly pronounced in China, with a 27% drop, and in the United States, where activity decreased by 16%. In both cases, the weakness in final demand was exacerbated by inventory adjustments, confirming that market normalization is not yet complete. Added to these factors was a negative currency effect of 143 million euros, mainly due to the US dollar, the Indian rupee, and the Turkish lira, as well as a negative scope impact of 54 million euros, primarily linked to the divestment of wine activities.

The trigger: escalating trade tensions with China

Beyond the numbers, an external factor played a central role in the stock’s deterioration: the trade conflict between China and the European Union. At the beginning of 2025, when Chinese retaliatory measures shifted from being a threat to regulatory reality, Pernod Ricard's shares immediately declined. Each confirmation by the Chinese Ministry of Commerce of the implementation of punitive tariffs resulted in several sessions of significant drops, illustrating the market’s extreme sensitivity to this issue.

Martell at the forefront of customs risk

The proposed tariffs, set at 30.6% for Martell cognac, have crystallized concerns. Martell, the group's flagship brand, was doubly penalized by the decline in demand and the suspension of duty-free imports of cognac in China starting December 2024. This situation has severely impacted the group’s visibility in China and in Global Travel Retail, where activity has significantly contracted.

In July 2025, however, Pernod Ricard announced it had reached an agreement with Chinese authorities following the anti-dumping investigation conducted by the Chinese Ministry of Commerce. The group stated it had entered into a minimum price commitment, known as a Price Undertaking, allowing it to avoid the implementation of the 30.6% tariff in exchange for maintaining a minimum sales price across the entire Chinese territory. Chinese authorities had determined that European cognac producers were selling their products below their normal value, causing substantial harm to the local industry. Pernod Ricard specified that this agreement did not in any way constitute an admission of engaging in dumping practices. Nevertheless, this regulatory relief remains conditional, as China reserves the right to reinstate tariffs in the event of a breach of commitments, which continues to weigh on risk perception.

Simultaneously, the group made several strategic adjustments throughout the year. The sale of the Imperial Blue division in India in July 2025 was part of a strategy to premiumize its portfolio. The issuance of one billion euros in bonds in the fall strengthened liquidity in a market context with more demanding interest rates. The proposal to appoint two new independent directors indicated a commitment to enhance governance, while the sale of Mumm sparkling wine operations in the United States in December continued the focus on higher value-added spirits and champagnes. These decisions were viewed as measures of financial and strategic discipline, though they did not serve as immediate stock market catalysts.

For the 2025/2026 fiscal year, the management is adopting a deliberately cautious stance. Pernod Ricard describes the current year as a transition period, expecting a gradual improvement in organic revenue trends in the second half. The group aims to preserve its organic operating margin as much as possible through strict cost control and the execution of its 2026-2029 operational efficiency program, which has a budget of 1 billion euros. It also intends to maintain strong cash generation, with strategic investments below 900 million euros, optimizing working capital requirements, and improving cash conversion compared to the previous year.
A valuation under pressure, a market still in suspense

In the stock market, the consensus remains marked by caution. The average target price is around 86 euros, indicating a theoretical potential of nearly 19%, interpreted more as a stabilization scenario rather than a bet on a quick rebound. The retention of a 4.70 euros per share dividend, offering a yield of nearly 6.5%, is one of the few anchors for long-term investors, in a case where confidence will need to be gradually restored.

Pernod Ricard's market performance in 2025 was not a year of isolated incidents, but rather one of deep reevaluation. The market has stopped treating the stock as a defensive growth asset and now views it as a group exposed to a longer, more uneven cycle, heavily dependent on the evolution of its key markets, particularly China. Thus, 2026 begins as a year of confirmation, where only tangible improvements in figures and regulatory visibility will be able to halt a downward trend that has persisted for more than twelve months.