Overview: Diageo’s Spirits Group reported a 3.7% year-over-year decline in U.S. sales for the July-September period, marking the first quarter of its fiscal year. While American revenue dipped, total organic sales rose 1.4% to $4.93 billion globally, with CEO Dave Lewis identifying the United States as central to restoring momentum.
The Full Story
The London-listed group noted that results in the first quarter represent a small step in the right direction despite continued market softness. In North America, Johnnie Walker whisky sales rose, alongside Smirnoff Ice RTD and Guinness stout. Conversely, some of Diageo’s biggest brands in North America, including Don Julio tequila and Casamigos, continued to book sharp sales declines over the quarter.
Performance was weighed on by a packaging quality issue in ready-to-drink products for Casamigos. Overall sales in the region are likely to decline over the year as a whole, but Diageo’s brands should gain back some market share from a year earlier. Analyst James Edwardes Jones at RBC Capital Markets described the quarter as less bad than expected following the update.
Brand & Industry History
The London-listed group has lost more than half its share value over the last five years amid declining booze sales that have also weighed on other distillers, from Jack Daniel’s maker Brown Forman to Pernod Ricard, the French group behind Absolut vodka and Jameson whiskey. Chief Executive Dave Lewis identified the U.S. as central to restoring Diageo’s momentum following this period of decline.
What This Means
The company backed its guidance for the full year, with organic sales expected to be flattish and operating profit to increase in the single digits. This improvement is boosted by a chunk of the $1 billion cost-savings program that Lewis set out this summer. Lewis stated that clear actions are underway to make the offer more competitive in North America.
Consumer Takeaway
The portfolio mix indicates resilience in whisky, vodka, and stout categories within the American market despite broader challenges. While tequila brands face headwinds from packaging issues and demand softness, consumers can expect Johnnie Walker and Guinness to maintain presence as the company seeks to regain share from a year earlier.
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