Diageo sales hit by weak emerging markets

Drinks giant Diageo today reported a 1.5 per cent decline in first-quarter sales, but said it was confident of delivering an increase for the full year.

The maker of Bushmills, Guinness and Johnnie Walker said sales had been hit by weak demand in the Asia Pacific, Eastern Europe and North America, along with currency devaluations in a number of emerging markets.

In volumes terms, sales during the three months to the end of September were 3.5 per cent lower than a year ago.

Chief executive Ivan Menezes said: “Emerging markets’ performance remains weak with further currency weakness in a few markets and specific geopolitical situations in some areas. However, our brand performance has been strong in many markets including Turkey, East Africa, India and Colombia.

“We expect full-year top-line growth to improve on last year’s performance.”

Keith Bowman, equity analyst at Hargreaves Lansdown, said today’s trading update was broadly in line with expectations, with sanctions against Russia increasing Diageo’s challenges in Europe, although a decline in Chinese sales has moderated.

He added: “In all, Diageo remains a core long-term investment. Its portfolio of spirit brands is strong, significant geographical diversity is enjoyed, whilst the group’s dividend policy remains progressive.”