Diageo Lowers Full-Year Guidance After Soft North America and China Sales
Diageo PLC, headquartered in London and known for brands like Smirnoff vodka, Johnnie Walker whisky, and Guinness, announced on Thursday a reduction in its full-year forecast due to sluggish sales. The company reported a 2.2% decline in sales to USD 4.88 billion for the first quarter of its financial year, down from USD 4.97 billion during the same period last year.
Sales Performance and Market Dynamics
On an organic basis, sales remained flat, outperforming the market consensus that predicted a 1.3% drop. Organic volume grew by 2.9%, but this was offset by a negative price/mix impact of 2.8%. This adverse mix was mainly driven by weak results in Chinese white spirits in the Asia Pacific region. Without the Chinese white spirits factor, the price/mix would have been almost unchanged.
- Organic net sales growth in Europe, Latin America & Caribbean, and Africa balanced out declines in Asia Pacific caused by weak Chinese white spirits.
- Performance in North America softened due to weak consumer confidence and tough comparisons from a year ago, including tequila restocking benefits linked to Don Julio tequila.
Diageo estimated that weakness in Chinese white spirits negatively impacted group net sales by around 2.5% in the quarter.
Revised Financial Outlook
As a result of these challenges, particularly the issues with Chinese white spirits and a softer environment in the U.S., Diageo adjusted its financial expectations for 2026. The company now projects organic net sales growth to be "flat to slightly down" instead of remaining at a similar level to fiscal 2025.
For financial year 2025, Diageo reported total sales of USD 20.25 billion.
Author's Summary
Diageo's lowered outlook reflects persistent weakness in Chinese white spirits and North American markets, prompting a cautious approach to growth expectations in the near term.