Pernod Ricard reported on Thursday a smaller-than-expected 0.9 per cent drop in sales for the first quarter of its 2027 fiscal year, hurt by weak demand and de-stocking in China and the US although demand in India was strong.

Pernod, the world’s second-largest spirits maker after Diageo, said underlying trends in China were improving, confirming its cautious optimism ahead of the Chinese Mid-Autumn Festival.

The maker of Martell cognac and Absolut vodka, which held unsuccessful merger talks with Jack Daniel’s maker Brown-Forman earlier this year, reiterated a forecast for broadly stable net sales in the fiscal year started on July 1.

Pernod reported Q1 sales of €2.234 billion (US$2.5 billion), an organic decline of 0.9 per cent against estimates of a 1.7 per cent decline in a company-compiled poll of analysts.

Shares in the company rose around 3 per cent following the results.

Sales fell 10 per cent in the US and 25 per cent in China but rose 19 per cent in India in the first quarter.

Finance chief Mauve Croizat told analysts inventory adjustments in China and the US would likely continue through the full year. In China, she said consumers were shifting to more private occasions rather than out-of-home alcohol consumption.

In India, the group has said it is taking preparatory steps toward a potential initial public offering. It reiterated that the decision to proceed with an IPO remained subject to board approval.

If approved, the IPO would still take a few months to execute with timing dependent on market conditions, Croizat said.

Pernod also said it would strongly defend its organic operating margin supported by strict cost control.

It also reiterated it expected sales growth at the lower end of its 3 per cent to 6 per cent target range through 2029, underscoring the prolonged downturn facing global spirits makers.

• Reporting by Dominique Vidalon; Editing by Sudip Kar-Gupta and Emelia Sithole-Matarise, of Reuters.