Johnnie Walker-maker Diageo goes ‘from bad to worse’ after first sales slide since pandemic

Whisky giant Diageo has insisted that it is “well-positioned” for any consumer rebound after suffering its first annual sales drop since the pandemic.

Shares in the Johnnie Walker maker slumped as investors expressed concern at news of the fall in sales and operating profit declines in four out of its five operating regions, and despite a hike in the shareholder dividend. One analyst suggested that “management seems to have taken its eyes off the ball” as the group was impacted by unfavourable currency rates and declining sales volumes.

The FTSE 100 company, whose many other brands include Gordon’s gin, Guinness and Baileys, said net sales slid by 1.4 per cent to $20.3 billion (£15.8bn) over the year to June 30. Organic sales were down 0.6 per cent as an increase in price and sales mix was offset by a 3.5 per cent fall in the volume of products bought, driven by a 21.1 per cent plunge in Latin America and the Caribbean. Diageo also said volumes were lower in North America amid a challenging consumer backdrop. There was sales growth in Europe, however, supported by strong sales of Guinness, particularly in Britain.

FTSE-100 spirits giant Diageo has a vast portfolio that includes Johnnie Walker whisky, pictured.

Chief executive Debra Crew said: “While [it] was a challenging year for both our industry and Diageo with continued macroeconomic and geopolitical volatility, we focused on taking the actions needed to ensure Diageo is well-positioned for growth as the consumer environment improves. With iconic brands that have been enjoyed for decades, Diageo takes a long-term view, and will continue to invest in our brands, people and diversified footprint to deliver sustainable long-term growth and generate shareholder value.”

The group, which has almost 30 malt distilleries in Scotland and some 3,500 employees north of the Border out of a global workforce of around 30,000, said organic operating profits fell by 4.8 per cent to $6bn (£4.7bn).

Russ Mould, investment director at AJ Bell, the investment platform, said: “Diageo has gone from bad to worse. The company can dress up the numbers all it wants, but it’s clear that something major has to change. Management seems to have taken its eyes off the ball with monitoring inventory levels and working out ways to keep consumers spending when they are being pickier with where they splash the cash.”

Aarin Chiekrie, equity analyst at investment firm Hargreaves Lansdown, noted: “Diageo served up a soft set of full-year results, with both revenue and profit heading in the wrong direction. Taking a step back, investors should remember that Diageo has a world-class portfolio of brands, including Guinness, Smirnoff, Johnnie Walker and Tanqueray. That’s helped Diageo hold or grow its market share in over 75 per cent of the regions it operates in, despite the current challenges for the wider industry.

“While there remains some short-term uncertainty in the drinks market, Diageo’s cash flows remain extremely healthy, and the dividend has been bumped up by 5 per cent to reward investors for their patience.”

Diageo shake-up: Former UK civil service chief to chair Scotland's biggest whisky producer