Diageo set for first post-COVID annual sales decline
By Emma Rumney and Cassandra Garrison
LONDON/MEXICO CITY, July 29 (Reuters) -Diageo DGE.L is set to post its first yearly sales decline since 2020 next week, when it needs to convince investors that plans to turn around its North American and Latin American businesses are showing progress.
The world's top spirits maker has come under pressure following a profit warning last November in Latin America and the Caribbean which shook investor confidence in its management. It has also lost market share in the U.S.
As a result, analysts on average expect Diageo to post a 0.2% decline in net sales for the year to June 30 when it reports results on Tuesday. The company, which makes Johnnie Walker whisky and Tanqueray gin, made net sales of 17.1 billion pounds ($22 billion) the previous year.
Diageo already made almost 11 billion pounds worth of sales in the first half, meaning it would only need another 6 billion pounds or so to achieve a flat result. Its second-half sales stood at 7.7 billion pounds last year.
Some analysts, like Fintan Ryan at Goodbody stockbrokers, have warned the outcome could be worse than consensus forecasts.
Persistent problems in the U.S., in addition to its troubles in Latin America, "could see this full-year delivery lower", he said in a note.
Some investors are also pessimistic.
"We're keeping our hopes quite low," said Fred Mahon, fund manager at Diageo investor Church House. Like Ryan, he cited weak luxury goods sales.
Diageo declined to comment.
Recent results from peers like Remy Cointreau RCOP.PA and LVMH's LVMH.PA drinks unit Moet Hennessy, in which Diageo owns a stake, illustrate the problems facing spirits makers.
Demand has slumped following a post-pandemic boom in sales, where cash-flush consumers splashed out on expensive booze. Stock ordered during the good times is now gathering dust, driving sales declines across the sector.
SHARE LOSSES
Investors want to see Diageo turn around market share losses at its North American unit, which spans its largest market, the U.S., and contributes 40% of sales.
Diageo's U.S. market share has suffered because spirits in which it has traditionally been strong, like whisky and gin, are less popular than in the past.
In the market for tequila, which has enjoyed fast-growing popularity over the last few years, pricier labels like Diageo's Casamigos have recently lost share to cheaper brands.
Nielsen data, provided to Reuters by an industry source, shows Diageo has lost U.S. market share in four of the six months to June.
MEXICANS PREFER MEZCAL
Diageo has also warned sales are likely to fall by another 10-20% in Latin America and the Caribbean. Brazil and Mexico have driven declines so far.
A build-up of unsold stock among wholesalers and retailers in Mexico caught Diageo by surprise in the first half.
Inventories at Mexican wholesalers have "not improved at all", one specialist spirits distributor told Reuters, asking not to be named.
Diageo brands were on aggressive promotions, the distributor said, with lots of three for two deals or discounts of up to 50% to shift stock.
Overall wine and liquor sales from wholesalers were down 6.2% in Mexico in the 12 months to May, with the declines led by champagne and whiskey, according to Mexican market intelligence firm ISCAM.
Diageo's Johnnie Walker is one of the company's key products in the Latin America region.
But the cost of international spirits is too high for many Mexicans today, said Benjamin Padron Novoa, a co-founder of prominent Mexican bar Licoreria Limantour.
Those that could still afford to splash out on expensive booze preferred to spend their money on local drinks like mezcal, he continued, adding that while this was even pricier than whiskey it at least had Mexican roots.
They would rather pay for something with Mexican heritage and made by small, family-owned distillers than give "1,000 pesos to an international company", he said.
($1 = 0.7769 pounds)
Diageo's U.S. market share over the six months to June (bps) https://reut.rs/46o7C67
Wine and spirits sales from Mexican wholesalers https://reut.rs/4dhbOXB
Reporting by Emma Rumney in London and Cassandra Garrison in Mexico City; Additional reporting by Richa Naidu; Editing by Matt Scuffham and Jan Harvey
Actifs liés
Dernières actualités
Avertissement : Les entités de XM Group proposent à notre plateforme de trading en ligne un service d'exécution uniquement, autorisant une personne à consulter et/ou à utiliser le contenu disponible sur ou via le site internet, qui n'a pas pour but de modifier ou d'élargir cette situation. De tels accès et utilisation sont toujours soumis aux : (i) Conditions générales ; (ii) Avertissements sur les risques et (iii) Avertissement complet. Un tel contenu n'est par conséquent fourni que pour information générale. En particulier, sachez que les contenus de notre plateforme de trading en ligne ne sont ni une sollicitation ni une offre de participation à toute transaction sur les marchés financiers. Le trading sur les marchés financiers implique un niveau significatif de risques pour votre capital.
Tout le matériel publié dans notre Centre de trading en ligne est destiné à des fins de formation / d'information uniquement et ne contient pas – et ne doit pas être considéré comme contenant – des conseils et recommandations en matière de finance, de fiscalité des investissements ou de trading, ou un enregistrement de nos prix de trading ou une offre, une sollicitation, une transaction à propos de tout instrument financier ou bien des promotions financières non sollicitées à votre égard.
Tout contenu tiers, de même que le contenu préparé par XM, tels que les opinions, actualités, études, analyses, prix, autres informations ou liens vers des sites tiers contenus sur ce site internet sont fournis "tels quels", comme commentaires généraux sur le marché et ne constituent pas des conseils en investissement. Dans la mesure où tout contenu est considéré comme de la recherche en investissement, vous devez noter et accepter que le contenu n'a pas été conçu ni préparé conformément aux exigences légales visant à promouvoir l'indépendance de la recherche en investissement et, en tant que tel, il serait considéré comme une communication marketing selon les lois et réglementations applicables. Veuillez vous assurer que vous avez lu et compris notre Avis sur la recherche en investissement non indépendante et notre avertissement sur les risques concernant les informations susdites, qui peuvent consultés ici.