Diageo Cuts Outlook Amid Weak Markets
Diageo PLC reduced its full-year outlook on Thursday, citing disappointing sales driven by weaker performance in North America and China. The London-based beverage giant owns brands including Smirnoff vodka, Johnnie Walker whisky, and Guinness.
Financial Performance Overview
For the first quarter of its fiscal year, sales declined 2.2% to USD 4.88 billion from USD 4.97 billion a year earlier. On an organic basis, revenue remained flat, performing better than the 1.3% drop predicted by analysts.
Regional and Segment Details
- Organic volume increased 2.9%, but this was offset by a negative price and mix effect of 2.8%.
- The adverse mix in Asia Pacific stemmed mostly from weak Chinese white spirits (CWS) sales.
- Excluding CWS, price and mix would have been nearly unchanged.
- Growth in Europe, Latin America & Caribbean, and Africa balanced some of the weakness in Asia Pacific and North America.
Impact of Chinese and U.S. Markets
Diageo estimated that underperformance in the Chinese white spirits segment cut group net sales by about 2.5% during the quarter. In North America, lower sales reflected weak consumer confidence and challenging year-over-year comparisons.
“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.”
The company noted strong tequila restocking in the prior year, particularly from its Don Julio brand, making current performance appear softer in comparison.
Outlook
Diageo now expects fiscal 2026 organic net sales to be flat or slightly lower, compared to earlier guidance suggesting growth comparable to fiscal 2025, which recorded total sales of USD 20.25 billion.
Author's summary: Diageo revised its financial outlook downward after North American weakness and China's sluggish spirits market offset stable growth elsewhere.