Diageo on Friday lowered its full-year sales and profit forecast once more and announced a sharply reduced interim dividend, revealing persistent demand weakness in key markets as the company reports its first results under new chief executive Dave Lewis.
Lewis said the U.S. market showed strain, noting that "U.S. spirits performance reflected pressure on disposable income, and competitive pressure from more affordable alternatives addressing a more stretched consumer wallet." Those conditions, together with softer Chinese demand, continue to weigh on the worlds largest spirits company.
Management revised its medium-term outlook for 2026, now anticipating that organic sales will decline 2% to 3% and that organic operating profit will be flat to up low-single-digits. That contrasts with the companys prior guidance, which called for flat to slightly lower sales and low to mid-single-digit profit growth.
The update included a steep fall in U.S. sales, down 9.3% year-on-year, with tequila brands such as Don Julio experiencing a particularly sharp drop of more than 23% in sales. In response to the earnings pressure, Diageo declared an interim dividend of $0.20 per share, down from $0.405 a year earlier, and established a minimum dividend floor of $0.50 per annum.
Lewis, who became CEO in January, inherits multiple strategic and operational headwinds. The company faces the task of reducing its debt burden while attempting to restore growth amid tariff-related uncertainty in the United States, cooling demand in China, fragile global consumer sentiment, and shifting drinking preferences among some consumers.
His appointment followed the abrupt resignation of Debra Crew, a period during which Diageo issued a profit warning in Latin America and experienced a notable slowdown in global growth. These developments heightened investor expectations for both meaningful debt reduction and a credible plan to reignite sales.
The companys figures and management commentary underline the combination of cyclical and structural pressures now confronting Diageo: weaker consumer purchasing power in key markets, intensifying competition from lower-priced alternatives, and the need to adapt to changing consumption patterns, all while balancing capital allocation to satisfy investors seeking lower leverage and reliable returns.
Separately, the companys communication included a prompt for investors weighing whether to buy Diageo shares and a description of an AI-driven stock selection tool that evaluates companies across many financial metrics and identifies investment ideas based on current data.
What to watch next
- Execution of a debt reduction plan and its impact on balance sheet metrics and investor confidence.
- Sales trends in the U.S. and China, and whether promotions or price adjustments against lower-priced competitors alter volume and mix.
- Management moves to address changing consumer preferences and to stabilize premium brands such as Don Julio.