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Shares of Diageo, the renowned alcohol producer behind Johnnie Walker, dropped more than 10% on Tuesday following a report of its first annual sales decline since the pandemic began. By the end of the trading day, shares had recouped some losses but still closed down 5.08%.
The London-based company reported a 0.6% decline in organic net sales for the fiscal year ending June 30, attributed mainly to underperformance in the Latin America and Caribbean markets. Reported net sales saw a 1.4% decrease.
Despite the overall downturn, Guinness emerged as a bright spot for Diageo. The iconic Irish stout, which has seen a surge in popularity among younger consumers thanks to celebrity endorsements, drove an 18% increase in overall beer net sales. Guinness’s volume growth was particularly strong in Ireland and Great Britain, contributing to double-digit increases.
The trend towards non-alcoholic beverages also benefited Diageo, with sales and volumes of Guinness 0.0 more than doubling over the fiscal year.
Diageo’s portfolio includes other well-known brands such as Baileys, Smirnoff, Captain Morgan, Don Julio, and Tanqueray.
CEO Debra Crew described the past year as “challenging” for both the company and the broader industry, citing macroeconomic and geopolitical uncertainties. She noted that North America has been particularly affected by cautious consumer behavior and inventory replenishment issues.
“While Diageo’s latest results are disappointing, they are not disastrous,” said Chris Beckett, head of equity research at Quilter Cheviot. “Revenue has remained relatively stable, down slightly by 1% overall and in the second half. The situation in Latin America is worrisome, as it was the primary driver of the profit warning earlier this year. Economic conditions in the region have exacerbated inventory problems, leading to a significant loss in margin.”
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