Guinness-maker Diageo cuts annual forecast on weak US and China demand
Guinness-maker Diageo has lowered its full-year outlook for sales and profit as weak demand in China and the US weighs on the British distiller.
The maker of Baileys and Johnnie Walker whisky now expects full-year organic net sales to be flat to slightly down, the company said Thursday, citing reduced consumption in China and a weaker-than-expected US consumer environment. It had previously forecast growth to be at a similar level to the prior year.
The company is trying to cut costs and sell assets to help reduce its $22bn debt as the sector contends with cooling post-pandemic demand, persistent weakness in key markets, tariff-related uncertainty, and shifting consumer drinking habits.
"We are not satisfied with our current performance and are focused on what we can manage and control," interim CEO Nik Jhangiani said in a trading update, as the company reported flat organic sales growth in its first quarter.
Mr Jhangiani had earlier said he expected a decision to be made on the permanent CEO by the end of October, following Debra Crew's abrupt departure in July.
"We are well advanced in sharpening our strategy, and we are developing and already implementing clear plans to drive growthacross the broader portfolio," Mr Jhangiani said on Thursday.
The distiller’s shares dropped as much as 3.9% in early London trading. They had fallen 29% this year through Wednesday, compared with a 22% decline in Pernod Ricard SA, the maker of Absolut Vodka and Jameson Irish Whiskey.
Diageo also trimmed its guidance for organic operating profit growth. The spirits maker has been contending with shifting drinking habits and subdued consumer spending, compounded by the lingering fallout from trade tariffs imposed under US President Donald Trump.
That echoes trends at French spirit-making rivals Pernod and Remy Cointreau. The latter cut its outlook last week amid subdued demand across markets, including China, Europe and the US, while Pernod’s sales fell more than expected last quarter.
Diageo reiterated expectations for an annual tariff hit of about $200m, and said it expects it will be able to mitigate about half of that.
Organic net sales were flat in the fiscal first quarter, the company said, compared with the average analyst estimate for a decline of about 1.1%.
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