Davide Campari-Milano Shares Plummet Following Disappointing Q3 Report

Third Quarter Report Reveals Negative Growth

Shares of Davide Campari-Milano, the Italian beverage giant, took a significant hit on Wednesday after a less than stellar third-quarter report highlighted the ongoing global luxury slowdown. The company reported a decline in organic sales growth, attributing this to inflationary pressures on disposable income and a decrease in consumer and distributor confidence. Davide Campari-Milano's portfolio boasts over 50 brands, including Aperol, Appleton, Cinzano, SKYY vodka, Espolón, Wild Turkey, Grand Marnier, and Forty Creek whisky. The company reported a 13% drop in adjusted earnings before interest and taxes in the third quarter compared to the same period the previous year, totaling 139.4 million euros. This figure fell short of the Bloomberg-compiled consensus estimate of 178.5 million euros.

Snapshot of Q3 Results

The third-quarter results, courtesy of Bloomberg, are as follows: - Adjusted Ebitda: EU171.8 million, -9.7% y/y, estimate EU209 million - Adjusted Ebit: EU139.4 million, -13% y/y, estimate EU178.5 million - Sales: EU753.6 million, +1.4% y/y, estimate EU820.3 million - Adjusted pretax profit: EU114.4 million, -23% y/y - Pretax profit: EU107.9 million, -20% y/y The financial results for the first nine months of the year were also provided.

Analysis of Earnings Report

Goldman analysts Olivier Nicolaï and Aron Adamski provided further insight on the earnings report, noting that the quarterly earnings were weak and fell short across all geographies. They highlighted the -1.4% in organic sales, a significant drop from the +9.3% Visible Alpha Consensus Data. The analysts also noted that Campari anticipates low-single digit organic sales growth in FY24 (+2% GSe), implying a return to some growth in Q4. Despite this, the company expects US consumption to remain soft, and EMEA to see further inventory reduction, ongoing competition, and low consumer confidence in select markets.

Market Reaction

Following the release of the report, shares in the company dropped by as much as 15% in Italy - the most significant one-day decline since early 2020.

Impact of Inflation and Economic Turmoil

Campari attributed the weak disposable income to the inflation storm sweeping across the West, which has led consumers to cut back on expensive liquor. Additionally, weak consumers in China, due to the property market and economic turmoil, show no signs of improving, despite Beijing's recent round of stimulus. This report comes on the heels of the world's largest luxury goods company, LVMH, missing earnings estimates for third-quarter organic sales due to a worsening slowdown in China. Analysts at Goldman referred to LVMH's earnings report as a "clear negative" for the global luxury industry.

Bottom Line

The disappointing third-quarter report from Davide Campari-Milano paints a concerning picture of the global luxury industry, with inflation and economic turmoil taking a significant toll on consumer spending. The question remains: is this a temporary setback or a sign of more significant, long-term issues for the luxury goods market? We'd love to hear your thoughts on this. Share this article with your friends and join the conversation. Don't forget to sign up for the Daily Briefing, delivered to your inbox every day at 6pm.