Diageo: What investors want to hear as Johnnie Walker owner looks to bolster share price

Investors will be keen to hear how Johnnie Walker owner Diageo plans to get things back on track as it battles trade tariffs and changing drinking habits.

The world’s largest spirits maker, which has almost 30 malt distilleries in Scotland and owns global brands such as Guinness stout, Smirnoff vodka and Captain Morgan rum, is due to post its full-year results on Tuesday, August 5. Its shares are down by nearly a quarter in the year to date and in May the group warned that it expects US trade tariffs to cost it some $150 million (£113m) annually as it launched a major cost-cutting plan.

Analysts at investment firm AJ Bell said the shares, and expectations, have been weighed down by fears over the impact of tariffs, a change in drinking habits, especially among younger generations consuming less alcohol, and also trading down, as inflation prompts many drinkers to switch to cheaper brands.

FTSE 100 spirits giant Diageo has a vast portfolio that includes Johnnie Walker whisky (above), Guinness stout and Smirnoff vodka.

“It may also be that Diageo is now paying the price for its prior ‘premiumisation’ strategy and witnessing a return to more normal drinking patterns as lockdowns fade into the memory and more workers return to the office,” the analysts noted.

“Shareholders will look for comments on price and volume, any impact from tariffs and also for geographic trends in the business, where Latin America in particular has continued to perform badly. Acting [interim] boss Nik Jhangiani may also offer more detailed comments on the planned ‘Accelerate’ turnaround programme,” they added.

Aarin Chiekrie, equity analyst at investment platform Hargreaves Lansdown, added: “Diageo’s full-year results come hot off the heels of a solid third-quarter performance, which saw sales rise 5.9 per cent, to $4.4 billion. Although these figures were flattered by customers stocking up on booze before the expected tariffs kicked in, there are early signs that the industry’s recovering from its cyclical hangover.

“Markets will be keeping a close eye on just how well Diageo is managing these ongoing tariff headwinds, which were expected to add around $150m in annual costs. The Johnnie Walker and Guinness maker plans to absorb half through operational efficiencies, with the rest likely passed on through price increases.

“Former CEO Debra Crew stepped down with immediate effect in mid-July, after more than two years of relatively underwhelming group performance, so investors are keen to get some updates on the search for a longer-term successor. As things stand, full-year underlying operating profits are expected to decline slightly, before returning to growth territory in the new financial year.”

In May, Diageo warned that it would be impacted by a 10 per cent tariff on UK and European imports into the US, after President Donald Trump launched a raft of tariffs. It said it believed its plans would mitigate around half of the impact of these higher costs on its profit and it would work on further measures to offset the impact.

However, the group also reported that net sales to $4.37bn for the three months to the end of March, amid a boost from continued strong Guinness sales.