Diageo Lowers Full-Year Outlook Amid Soft Sales
Diageo PLC announced a reduction in its full-year guidance due to sluggish sales, primarily affected by weak demand in North America and China. The London-based company, known for 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, compared to USD 4.97 billion the previous year.
Sales Performance Details
On an organic basis, sales remained flat, outperforming the market consensus expectation of a 1.3% decline. The company noted a 2.9% rise in organic volume growth, which was largely offset by a negative price and mix impact of 2.8%. This adverse mix was mainly due to weaker results in Chinese white spirits within the Asia Pacific region. Without this factor, price/mix would have been relatively stable.
Regional Sales Insights
- Organic net sales increased in Europe, Latin America & Caribbean, and Africa.
- Weaker Chinese white spirits hurt Asia Pacific results.
- North America showed softer demand, influenced by weaker consumer confidence.
Diageo estimated that weakness in Chinese white spirits reduced group net sales by around 2.5% during the quarter.
In North America, Diageo faced tough comparisons due to tequila restocking benefits seen during the first quarter of the previous year, particularly from strong Don Julio tequila sales.
Updated Financial Forecast
Reflecting these challenges, especially in Chinese white spirits and the US market, Diageo revised its financial 2026 outlook. The company now expects organic net sales growth to be "flat to slightly down" compared to the earlier forecast of maintaining similar levels to fiscal 2025. For financial 2025, Diageo reported sales of USD 20.25 billion.
"Financial 2026 expectations for organic net sales growth have been lowered to flat to slightly down from being at a similar level to fiscal 25."
Author's summary: Diageo trims its 2026 sales forecast as weak demand in North America and China, especially in Chinese white spirits, offsets growth in other regions, signaling a cautious outlook.