Diageo Lowers Full-Year Guidance Amid Market Challenges
Diageo PLC, the London-based owner of brands like Smirnoff vodka, Johnnie Walker whisky, and Guinness, announced on Thursday a revision to its full-year outlook due to sluggish sales performance in North America and China.
First Quarter Sales Details
Sales in the first quarter of the financial year declined by 2.2%, dropping to USD 4.88 billion from USD 4.97 billion the previous year. On an organic basis, sales remained flat, outperforming the market consensus forecast of a 1.3% decrease.
Factors Affecting Sales Performance
- Organic volume growth was 2.9%, but this was offset by a negative price/mix impact of 2.8%, mainly due to weaker Chinese white spirits sales in Asia Pacific.
- Excluding Chinese white spirits, the price/mix effect would have been roughly stable.
- Organic net sales growth in Europe, Latin America & Caribbean, and Africa was counterbalanced by softness in Asia Pacific and North America.
Diageo estimates that weakness in Chinese white spirits negatively impacted group net sales by around 2.5% in the quarter.
In North America, challenging comparisons included strong tequila restocking the previous year, notably Don Julio growth in the first quarter last year.
Adjusted Financial Outlook
Reflecting the weaker Chinese white spirits demand and softer US market conditions, Diageo revised its 2026 financial expectations for organic net sales growth to "flat to slightly down," a downgrade from the prior forecast of sales being "at a similar level to fiscal 25."
For fiscal 2025, Diageo reported total sales of USD 20.25 billion.
Author's Summary
Diageo has lowered its full-year expectations due to weak demand in China and North America, despite some regional growth, signaling ongoing market challenges.
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