Diageo Lowers Full-Year Guidance Amid Challenging Markets
Diageo PLC announced on Thursday a reduction in its full-year forecast due to sluggish sales driven by weak performance in North America and China. The London-based company, owner of brands like Smirnoff vodka, Johnnie Walker whisky, and Guinness, reported a 2.2% decline in sales to USD 4.88 billion in the first quarter of its financial year, down from USD 4.97 billion a year ago.
Sales Performance and Market Impact
On an organic basis, sales remained flat, outperforming the market consensus, which predicted a 1.3% decrease. Organic volume growth was 2.9%, but this was offset by a negative price/mix effect of 2.8%, mainly due to an adverse product mix in Asia Pacific caused by weaker results in Chinese white spirits.
Excluding the impact from Chinese white spirits, the price/mix would have been largely stable. While organic net sales increased in Europe, Latin America & Caribbean, and Africa, this was counterbalanced by soft results in North America and the Asia Pacific region, where Chinese white spirits underperformance significantly impacted sales.
Regional Challenges
- Chinese White Spirits (CWS) weakness negatively affected group net sales by approximately 2.5% in the quarter.
- In North America, tough year-ago comparatives, including strong Don Julio tequila restocking, contributed to the soft sales environment.
Revised Financial Expectations
Reflecting the challenging outlook caused by CWS weakness and a softer U.S. market, Diageo revised its financial year 2026 guidance for organic net sales growth to "flat to slightly down," compared with the previous expectation of sales "to be at a similar level to fiscal 2025."
For financial year 2025, Diageo reported total sales of USD 20.25 billion.
"Weakness in Chinese white spirits negatively impacted group net sales by around 2.5% in the quarter."
"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.'"
Author's summary: Diageo cut its full-year forecast after soft North American demand and a downturn in Chinese white spirits weighed heavily on first-quarter sales performance.