Smokers Have More Cash to Spend on Cigarettes, Kool Maker Says

(Bloomberg) -- Imperial Brands Plc, the maker of Kool cigarettes, is finding that consumers have more cash to spend on tobacco as the pandemic leads to canceled vacations and fewer leisure activities.

Cigarette volumes have beat expectations in the 12 months through September, with sales up 1% on a constant-currency basis, the company said Thursday. The stock rose as much as 3%.

The smidgen of growth pleased investors, who even in good times just expect single-digit growth from the industry given that tobacco consumption has been declining for decades. Stronger sales in Europe and the U.S. offset weakness in duty-free shops and summer tourist destinations like Spain, where cigarettes are cheaper.

“The focus will now shift into next year and whether it can maintain this momentum when dynamics start to change again,” wrote Owen Bennett, an analyst at Jefferies.

Earnings per share probably fell about 6% in the past fiscal year due to costs related to Covid-19 outbreak on a constant-currency basis, Imperial said.

Chief Executive Officer Stefan Bomhard, who started in his position in July, faces the task of catching up with bigger rivals in next-generation products and gaining back investors’ trust after the stock lost more than half its value in about three years.

Imperial’s cigarette brands have been more resilient than vaping products during the pandemic. Revenue from alternatives to smoking plunged 30% as the company reduced investment in underperforming brands. Imperial owns Blu in the U.S., where there’s been a consumer backlash against vaping after the explosive growth of rival Juul among teenagers and a health scare last year.

The company is on track to complete the sale of its worldwide premium cigar business at the end of this month, after a delay attributed to the pandemic. Imperial has provided a six-month loan to the buyers as they finalize financing arrangements.

©2020 Bloomberg L.P.