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Diageo PLC on Thursday lowered full-year guidance amid sluggish sales held back by weak contributions in North America and China. London-based Diageo, which owns Smirnoff vodka, Johnnie Walker whisky and Guinness, said sales fell 2.2% to $4.88 billion in the first quarter of its financial year from $4.97 billion the year prior. On an organic basis sales were flat, better than the 1.3% drop forecast by market consensus. Diageo said organic volume growth of 2.9% was offset by negative price/mix of 2.8%, largely due to adverse mix in Asia Pacific due to the weaker results in Chinese white spirits. Excluding this, price/mix would have been relatively flat. Organic net sales growth in Europe, Latin America & Caribbean and Africa was offset by weakness in Chinese white spirits impacting Asia Pacific results and softer performance in North America reflecting weak consumer confidence. Diageo estimates that weakness in CWS in China negatively impacted group net sales by around 2.5% in the quarter. In North America, the firm highlighted tough comparatives including the benefit from tequila restocking given strong Don Julio tequila growth through the first quarter a year ago. Reflecting the CWS weakness and softer US environment, Diageo lowered financial 2026 expectations for organic net sales growth to ‘flat to slightly down’ from ‘to be at a similar level to fiscal 25’. In financial 2025, Diageo reported sales of $20.25 billion. Organic operating profit growth is expected to be low to mid-single digit, compared to guidance of mid-single-digit before and after $4.34 billion reported in financial 2025. In response, shares in Diageo fell 3.0% to 1,744.38 pence each in London on Thursday morning. Diageo continues to expect around $3 billion of free cash flow, improved from $2.7 billion in financial 2025. Guidance for the expected impact of tariffs into the US from UK and European imports remains unchanged at $200 million pre mitigation on an annualised basis. The firm said its Accelerate programme is on course to deliver around $625 million cost savings over the next three years. Interim Chief Executive Nik Jhangiani said he is ‘not satisfied with our current performance’ and ‘focused on what we can manage and control.’ He said early results from initiatives to strengthen commercial execution capabilities, notably in Europe, are ‘encouraging’, and ‘we are embedding a more rigorous performance-driven culture across the business.’ Copyright 2025 Alliance News Ltd. All Rights Reserved.
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