Diageo plc. DEO famed for its Johnnie Walker whisky and Tanqueray gin, is bracing for its first yearly sales decline since 2020. The company has been under the radar following a profit warning last November, leading to a dip in investor confidence.
What Happened: Diageo’s U.S. market share has seen a downward trend. Analysts are predicting a 0.2% fall in net sales for the year ending June 30. The previous year’s net sales of Diageo were 17.1 billion pounds ($22 billion), Reuters reported on Monday.
Despite achieving almost 11 billion pounds ($14.13 billion) in sales during the first half of the year, analysts like Fintan Ryan at Goodbody Stockbrokers caution that the final result could be worse than consensus forecasts. Persistent issues in the U.S. and Latin America could result in a lower full-year delivery, Ryan noted.
Diageo’s recent struggles mirror the broader challenges the spirits industry is facing, as demand has dropped following a post-pandemic sales boom. Investors are eager to see Diageo reclaim its market share in North America, which contributes to 40% of its sales.
Moreover, Diageo has cautioned of a potential 10-20% sales drop in Latin America and the Caribbean. The company was taken by surprise by the build-up of unsold stock among wholesalers and retailers in Mexico during the first half of the year.
Why It Matters: Earlier this year, Diageo’s shares took a hit, dropping over 3% after the company reported a decline in organic net sales, missing analyst estimates. The spirits giant also warned of further challenges in Latin America, where unsold stock accumulates.
Adding to the company’s woes, American rapper Sean "Diddy" Combs and Diageo ended their long-standing partnership on Cîroc vodka and DeLeón tequila earlier this year. The split followed a legal dispute in which Combs sued Diageo, alleging the company neglected the DeLeón brand in favor of its other tequila labels.
Price Action: Diageo closed at $132.43 on Friday, according to Benzinga Pro.
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This story was generated using Benzinga Neuro and edited by Pooja Rajkumari
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