Pernod Ricard, which is in talks to merge with U.S. rival Brown-Forman, reported a stronger-than-expected 0.1% rise in third-quarter sales but warned the decline in tourism due to the Iran war would hurt its travel retail business and impact full-year sales.

The second-largest Western spirits group behind Diageo said it expected group organic net sales to decline by 3% to 4% in the current fiscal year that started July 1; its shares fell 1.7% at 0819 GMT.

Pernod is the latest company to report a significant hit to sales due to the conflict in the Middle East, after France's luxury groups all pointed to weaker sales in the first three months of the year following a sharp slowdown in shopping in the region.

Duty-free stores selling premium perfumes and spirits are also feeling the pain from shuttered airports and curbs on travel to the region.

Travel retail accounted for 6% of Pernod's net sales in 2025.

Pernod is in merger talks with Brown-Forman, which would create the world's No. 2 spirits maker by sales behind London-based Diageo, saving the combined company as much as $450 million a year and helping offset the decline in alcohol consumption, say analysts.

However U.S. spirits group Sazerac has also offered to buy Brown-Forman for about $15 billion, a source familiar with the matter said on Wednesday (April 15), complicating the talks.

Production: Ardee Napolitano, Clotaire Achi/Reuters