Diageo’s Share Price Declines Amid Weak Q1 Performance
Diageo’s net sales fell by 2.2% between July and September, mainly due to ongoing difficulties in North America and the Asia Pacific region. The company’s shares continued their downward trend on Thursday following a guidance cut prompted by these recent sales challenges. Diageo’s share price last traded 2.4% lower at £17.53.
Financial Highlights for Q1
- Net sales reached $4.9 billion, showing a 2.2% decline over the quarter.
- The drop was primarily influenced by asset disposals.
- Organic net sales remained flat during the first fiscal quarter.
- Group volumes grew by 2.9% year on year, but this was offset by a negative price/mix impact of 2.8%.
Regional Performance Analysis
Diageo attributed its limited growth in the quarter mostly to Asia Pacific, where results were weakened by poor sales in Chinese white spirits (CWS).
“The lack of growth was largely due to adverse mix in Asia Pacific due to the weaker results in China in Chinese white spirits (CWS).”
The company estimated that weak CWS sales reduced quarterly net sales by 2.5%. Asia Pacific net sales dropped 9.7% on a reported basis and 7.5% organically between July and September.
In Europe, Africa, and Latin America & the Caribbean, organic net sales growth was neutralized by disappointing sales in North America.
“Weak North American sales were driven by a challenging environment across consumer goods.”
Reported net sales in North America, Diageo’s largest market, fell 3.5%, while the organic decline was somewhat lower at 2.7%.
Summary
Overall, Diageo faces significant pressure in key markets, with sales struggles in North America and Asia Pacific hindering growth despite volume gains.
Author's Summary
Diageo’s Q1 sales were flat overall, but sharp declines in North America and Asia Pacific led to a lowered outlook and a 2.4% drop in share price.