Diageo shares slide on profit warning after weak Chinese demand
Shares in FTSE 100 drinks giant Diageo have fallen after weak demand in China and the US hurt sales and profit expectations.
The group said its operating profit growth was set to be in the low to mid single-digit range for the year to June 2026, down from its previous guidance of mid single digits.
Sales were now likely to contract compared to 2025, Diageo warned, compared to its previous expectations of flat sales.
Diageo, which makes Guinness and Johnnie Walker, put the move down to “the adverse impact from Chinese white spirits and a weaker US consumer environment than planned for”.
The company also warned it expected to take a $200m (£153m) knock from President Donald Trump’s US tariffs.
“We are not satisfied with our current performance and are focused on what we can manage and control; acting with speed to drive efficiencies, prioritising investment and adapting more quickly to an evolving consumer environment,” interim chief executive Nik Jhangiani.
Shares fell 2.8 per cent to 1747p early on Thursday.
Adam Vettese, market analyst for eToro, said: “Diageo’s latest update reveals a somewhat concerning outlook with some signs of resilience but also significant headwinds, and a cut in forecast being the main talking point.
“While there was a steady performance in Europe, the slowdown in the US and China poses a real challenge.
“The impact of elevated living costs is visible, with US consumers spending more but buying less.
“This is weighing heavily on premium spirits demand and profitability, as well as stiff competition in the tequila space.”
Diageo under pressure
The profit warning marks the latest setback for the beleaguered drinks business, which has seen its shares fall by nearly a third since the start of the year as consumers trade down to cheaper spirit brands.
Diageo’s former boss Debra Crew abruptly stepped down with immediate effect in July after just two years at the helm of the business.
Her tenure had been marred by operational missteps and external headwinds.
Within five months of taking over, she was forced to issue a profit warning after Diageo misread sales trends in Latin America – a key market – leading to a steep drop in earnings guidance.
Diageo’s annual report revealed that Crew’s remuneration increased from $3.8m to $4.8m in her final year in charge.
Diageo on Thursday reported net sales of $4.9bn for the three months to the end of September, a fall of 2.2 per cent on last year.
The Smirnoff and Baileys maker said it saw “solid” sales in Europe, Latin America and Africa, but demand for spirits declined in the US, while soft sales in China alone took a 2.5 per cent hit to overall turnover.
Diageo vowed to cut costs by as much as $625m over the next three years in a bid to streamline its operations and improve profitability.
“We are well advanced in sharpening our strategy, and we are developing and already implementing clear plans to drive growth across the broader portfolio, ensuring that we meet relevant consumer occasions of the future,” Jhangiani said.