Diageo Lowers Full-Year Outlook Amid Challenging Market Conditions
Diageo PLC announced a reduction in its full-year guidance due to soft sales performance, particularly 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, down from USD 4.97 billion the previous year.
Sales Performance and Market Impact
On an organic basis, sales remained flat, outperforming analysts’ expectations of a 1.3% decline. The company experienced organic volume growth of 2.9%, which was counterbalanced by a negative price/mix impact of 2.8%. This was mainly caused by unfavorable product mix changes in the Asia Pacific region, attributed to weak results in Chinese white spirits (CWS). Without this factor, price/mix would have been fairly stable.
Regional Highlights
- Europe, Latin America & Caribbean, and Africa saw organic net sales growth.
- Asia Pacific struggled with Chinese white spirits weakness, dragging overall regional sales down.
- North America faced softer consumer demand and difficult year-on-year comparisons.
Diageo estimates that weakness in Chinese white spirits negatively impacted group net sales by around 2.5% in the quarter.
In North America, the company noted tough comparisons from the previous year’s tequila restocking boost, driven by strong Don Julio tequila growth in that period.
Outlook and Future Guidance
Reflecting challenges in Chinese white spirits and a softer US market, Diageo revised its financial 2026 expectations for organic net sales growth to "flat to slightly down," compared with the previous forecast of remaining at a similar level to fiscal 2025. For fiscal 2025, Diageo recorded total sales of USD 20.25 billion.
Reflecting the CWS weakness and softer US environment, Diageo lowered financial 2026 expectations for organic net sales growth to "flat to slightly down."
Author’s Summary
Diageo’s lowered guidance highlights ongoing challenges in China and North America, exacerbated by product mix shifts and weak consumer demand.