Weak results and falling shares: Diageo faces challenges
The world’s largest spirits company group, Diageo, shocked investors with unexpectedly weak quarterly results. The company blames the decline on weak consumption and inflation in the Americas. Diageo’s sales fell for the first time since the pandemic, leading to a 10 percent drop in the company’s share price on the London Stock Exchange. The 1.4 percent decline in sales, which reduced revenue to $20.3 billion, caused a disproportionate reaction in the market.
The biggest problem was in the Latin American region and Africa, where inflation reaching historic highs drove consumers towards cheaper products. Debra Crew, CEO of Diageo, although she can be satisfied with the 8 percent increase in operating profit, is disappointed with the performance of the other regions, which without exception ended the half year in the red. The decline in profits in North America and Latin America was particularly painful, with a drop of $142 million and $302 million, respectively.
In the United States, in particular, tequila revenues and Johnnie Walker whiskey sales decreased significantly, the former by 5 percent and the latter by 10 percent. Vodka and rum sales also fell, while revenues from pre-mixed cocktails rose 15 percent. In Europe, Guinness beers grew by 18 percent, but sales of spirits stagnated. China saw a 12 percent increase in revenue, although the impact of Covid inventories is still felt.
Diageo’s outlook for the 2025 business year is not very encouraging. The company did not provide specific numbers or guidance, only noting that the consumer environment will continue to be challenging, and the decline in profit margins must be prevented by effective work.
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