Diageo plc reported that organic net sales for the 13‑week period ending September 30, 2025 were flat at $4.88 billion, a decline of 2.2 % from the $4.99 billion recorded in the same period a year earlier. The flat top line was driven by a 2.9 % increase in organic volume that was entirely offset by a 2.8 % negative price‑mix impact, largely caused by a 60 % drop in Chinese white‑spirits sales. In North America, organic net sales fell 2.6 % to $1.85 billion, while growth in Europe, Latin America and Africa helped balance the decline in China and the United States.
The company’s interim chief executive, Nik Jhangiani, highlighted that the flat sales result from a softer U.S. consumer environment and a sharp contraction in Chinese white‑spirits demand. He noted that the company is “not satisfied with the current performance” and is focusing on operational control, cost discipline and strategic sharpening to counter the headwinds. Jhangiani also emphasized that the Accelerate program remains on track to deliver approximately $625 million in cost savings over the next three years, a target that has been increased from an earlier $500 million goal.
Diageo lowered its full‑year 2026 guidance for organic net sales to “flat to slightly down,” a downgrade from the prior “zero growth” outlook. Operating‑profit growth guidance was also trimmed to “low to mid‑single‑digit” from a previous “mid‑single‑digit” range. The guidance cut signals management’s concern about continued weakness in China and the U.S., as well as the impact of U.S. and European tariffs, which the company estimates will cost about $200 million in operating profit annually. The company maintains its $3 billion free‑cash‑flow target for 2026 and its leverage‑ratio goal of 2.5‑3.0× by fiscal 2028.
Analysts reacted to the guidance downgrade with caution. The flat sales beat the consensus estimate of a 1.3 % decline, but the revised outlook dampened enthusiasm. Market participants focused on the persistent pricing pressure in China, the competitive squeeze in U.S. tequila, and the uncertainty surrounding the company’s leadership transition, as Debra Crew’s departure in July left the CEO role in interim hands. The guidance cut was the primary driver of the negative market reaction, outweighing the modest beat in sales.
The company’s segment performance highlights a mixed picture. While Europe, Latin America and Africa delivered growth, North America and Asia Pacific lagged, with Chinese white‑spirits falling 60 % and U.S. spirits down 4.1 %. The Accelerate program’s cost‑saving trajectory is a tailwind, but the negative price‑mix and tariff impact represent significant headwinds that could compress margins if not offset by further efficiencies.
Overall, Diageo’s flat Q1 organic sales and downward guidance underscore the company’s cautious stance amid macro‑economic headwinds. The firm’s focus on cost discipline, strategic sharpening and the Accelerate program suggests it is positioning itself to navigate the challenging consumer environment while maintaining long‑term value creation.
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