Diageo investors struggle to raise a glass
Last updated: 09:30 07 Nov 2025 EST, First published: 09:29 07 Nov 2025 EST
Guinness maker Diageo PLC (LSE:DGE) has delivered a small win, but investors may struggle to raise a glass.
First-quarter trading came in ahead of expectations, yet a gloomier outlook for the US and China and a softer second quarter could keep the fizz out of the shares.
Citi said the drinks group’s organic sales growth for the first quarter of its 2026 financial year was flat, better than consensus forecasts for a 1.3% decline, with every region except Asia outperforming.
Europe showed notable strength, while North America’s 2.7% sales drop was less severe than feared.
But behind that improvement lies weakness in Diageo’s core US spirits business, where sales fell 4.1% once a favourable timing benefit is stripped out, a sign, Citi argues, of a slower rate of consumption and a tougher second quarter ahead.
Asia remains the biggest drag. China’s white spirits business tumbled by about 60%, creating a 250-basis-point headwind to group sales that is likely to persist through the year.
Management has accordingly trimmed full-year guidance to flat or slightly negative organic growth, a downgrade that was expected but still unwelcome.
Even so, Citi sees the downside as limited. Consensus forecasts for full-year earnings per share are unlikely to shift much following the update, and the company’s balance sheet leaves room for faster debt reduction once a permanent chief executive is appointed.
With Diageo shares already priced for caution, investors may be content to wait... but the next few months could test that patience.
