Miss but FY outlook maintained Q1 organic sales +1.3% are disappointing (consensus +3.3%), although the comp was very difficult this quarter (+10.4% last year). Reported sales missed by 1%, with Americas a touch light, Asia/RoW nearly 3% light and Europe 2% ahead. FY20 guidance for organic profit from recurring operations growth of 5-7% is left unchanged (consensus +7.9%), and we note that Q1 is typically less important to the FY. However, management does provide the caveat to guidance that the environment “remains particularly uncertain.” Management will buy back up to €150m of shares over the period 18 October-18 December. There is a call at 9am CET. Key markets are resilient The Americas region faced a tough comp after posting +6% last year, and this was combined with the fact that the company has been reducing the weeks of inventory in the channel in the US. Nevertheless, the US grew by an impressive 6% in Q1 – albeit boosted by some advance shipments. Underlying growth in the US of +4% implies no change in the rate of momentum there, but we note the Scotch tariffs will take effect on 18th October. China +6% and India +3% posted solid growth against very difficult comps. In Europe, Western Europe returned to growth in the period. Global Travel Retail -6% was especially weak. Doing the right things Pernod has taken some encouraging steps to enhance profitability. Earlier this month, management announced that it would finally collapse the two separate French businesses into one. The company’s primary ambition remains growth, however. The recent acquisition of Castle Brands and the opening of a Chinese malt whiskey distillery demonstrate management’s commitment to finding growth opportunities in many different corners of the market, many of which have been overlooked by the competition.