Diageo: Guinness maker warns tariffs could offset recovery
Drinks giant Diageo has cautioned on the effects of Donald Trump’s tariffs on its business, which outperformed analysts’ expectations this year after a significant contraction last year.
US tariffs, “whilst anticipated”, could “impact [our] building momentum,” the Guinness-maker’s chief executive Debra Crew said, adding that the levies clouded the company’s ability to predict what would happen to sales.
Trump has pledged to impose 25 per cent tariffs on neighbouring Canada and Mexico – although he since agreed to hold off for 30 days – and has already imposed a 10 per cent tariff on China.
This is particularly significant for Diageo, which is one of Mexico’s biggest whiskey operators and which produces both Don Julio and Casamigos tequila in Mexico to be sold in the US.
Crew said that Diageo has “anticipated and planned for a number of potential scenarios regarding tariffs” and “are taking a number of actions to mitigate the impact and disruption to our business that tariffs may cause”.
“We will also continue to engage with the US administration on the broader impact that this will have on everyone supporting the US hospitality industry, including consumers, employees, distributors, restaurants, bars and other retail outlets,” she added.
On Radio 4’s Today show this morning, AJ Bell investment director Russ Mould said Diageo’s are “looking at these tariffs very nervously”.
“The problem for the market is that they just don’t quite know what to expect,” Mould added.
There are so many different things to think about that the market is for the moment just hiding in their shell
Charlie Huggins, manager of the quality shares portfolio at Wealth Club, said: “The scale and breadth of Diageo’s portfolio means it is capable of meeting this challenge head on. It also has scope to accelerate productivity initiatives, which will now become even more important.
“However, with Diageo’s CEO, Debra Crew, under mounting pressure to turn things around, the last thing she needed was more uncertainty. Trump’s tariffs cloud the outlook and are a major kick in the teeth for shareholders.”
Jeffries analysts rated the stock a ‘Buy’ but similarly warned on the effect of tariffs.
Diageo sales top market expectations
Reported operating profit fell five per cent in first half of the 2025 financial year, from $3.3bn (£2.66bn) in the first half of last year to $3.15bn (£2.54bn).
Reported net sales fell one per cent to $10.9bn, from $10.96bn last year. Organic sales rose one per cent, above analysts’ expectations of 0.5 per cent.
Earnings per share dropped 12 per cent to 87.1p. Diageo will pay an interim dividend of 40.5p on February 28.
Despite the contraction, this is an improvement in Diageo’s performance – profit fell nearly five per cent last year after sales in Latin America slumped. Sales of Scotch and rum, in particular, slowed down.
“Our fiscal 25 first half results marked a return to growth, delivering organic net sales growth of one per cent despite a challenging industry backdrop as consumers continue to navigate through inflationary pressures,” Chief executive Debra Crew said.
“Growth in four of our five regions was supported by market share gains… we remain confident of favourable long-term industry fundamentals and more importantly in our ability to outperform the market,” Crew added.
Diageo said that its Guinness brand saw double-digit growth for an eighth consecutive half.
Rumours swirled at the end of January that Diageo was set to offload its Guinness arm for up to £8bn, as well as its 34 per cent stake in champagne maker Moet Hennessy.
However, Diageo said it had “no intention” to sell either brand. Guinness has been a particular driver for the company, with 18 per cent growth last year supported by social media success and the younger generations’ rediscovery of the drink.
Last Christmas, some pubs in the City ran out of Guinness amid unprecedented demand over the festive period.