By Francesca Landini
MILAN (Reuters) - Drinks group Campari warned on Tuesday that it will feel a more severe impact from the coronavirus crisis in coming quarters, after reporting a 5% drop in sales between January and March.
Campari's sales in Italy, its second-biggest market, fell 24% on an organic basis in the first quarter, the company said on Tuesday, and global consumption of its bright orange aperitif Aperol was flat after double-digit growth last year.
"The group expects its performance to be more impacted in the second quarter and the beginning of the third, the peak season for the high margin and on-premise skewed aperitif, business," Campari said in a statement.
In a conference call with analysts, Campari Chief Financial Officer Paolo Marchesini said there would be pressure on margins in the second quarter, but added the group was cutting costs and postponing discretionary spending to mitigate the coronavirus effect.
The maker of red bitter Campari and Aperol said first-quarter sales fell 5.3% on an organic basis as lockdowns imposed to contain the spread of the virus dented demand for its aperitifs, especially in Italy.
Total sales dropped to 360 million euros in the first three months compared with 370 million euros a year earlier. Global sales of Aperol fell 0.2% in the first quarter compared with a 27% increase in the same period of last year.
APERITIFS UNDER LOCKDOWN
In Italy - which accounts for nearly one fifth of Campari's revenue - bars and restaurants have been shut since the beginning of March. They are expected to open again on June 1 and are now only allowed to prepare food and drinks for delivery or take-away services.
The country has a strong tradition of socialising over early evening drinks and some consumption has moved from bars to homes during lockdown as Italians use social media to drink aperitifs in the virtual company of friends.
But this was not enough to support sales, so the company moved to enhance its online presence.
"We are accelerating programmes in digital transformation and e-commerce," Chief Executive Bob Kunze-Concewitz said during the conference call, mentioning online tutorials to prepare cocktails and the sale of combos with all the ingredients needed to make a concoction.
Aperol, the key ingredient for the popular Spritz cocktail, is Campari's best-selling product representing roughly one fifth of its annual sales.
With the gradual lifting of the restrictive measures across countries, the company said that the negative impact of the coronavirus was expected to lessen later in the year.
Shares in Campari fell as much as 2.3% after the results but recovered and were up 0.7% by 1405 GMT at 6.90 euros. They have fallen 15.6% since the start of this year.
In the first quarter, adjusted earnings before interest and taxes (EBIT) fell to 47.9 million euros from 72.4 million euros a year earlier. EBIT margin on sales, which is an indicator for profitability, came in at 13.3% down from 19.6%.
The group also said it had signed the deal for the acquisition of 80% of French Champagne brand Lallier for 21.8 million euros, becoming the first Italian player to enter the Champagne sector.
(Editing by Susan Fenton)