Diageo Reports Profit Warning After Weak Demand
Diageo announced net sales of $4.9bn for the quarter ending in September, marking a 2.2% decline compared to the previous year. The FTSE 100 beverage giant's shares dropped following disappointing sales and profit forecasts due to weak demand in China and the US.
Sales and Profit Forecast Adjustments
The company revised its operating profit growth forecast to a low to mid single-digit increase for the year ending June 2026, down from an earlier estimate of mid single digits. Diageo also warned that sales are now expected to decline compared to 2025, reversing earlier expectations of flat sales.
Reasons for Decline
Diageo attributed the negative outlook to «the adverse impact from Chinese white spirits and a weaker US consumer environment than planned for». Additionally, the firm anticipates a $200 million (£153 million) loss due to tariffs imposed by President Donald Trump’s administration.
“We are not satisfied with our current performance and are focused on what we can manage and control; acting with speed to drive efficiencies, prioritising investment and adapting more quickly to an evolving consumer environment,” said interim chief executive Nik Jhangiani.
Market Reaction and Analyst View
Following the announcement, shares declined 2.8% to 1747p early on Thursday. Adam Vettese, market analyst at eToro, commented:
“Diageo’s latest update reveals a somewhat concerning outlook with some signs of resilience but also significant headwinds, and a cut in forecast being the main talking point. While there was a steady performance in Europe, the slowdown in the US and China poses a real challenge.”
Summary
Diageo faces challenges from weakening demand in key markets and tariff impacts, prompting a cautious profit outlook and a share price drop.