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Diageo Underlying Sales Growth Shows Surprise Rise On US Strength

By Dayeeta Das
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Diageo Underlying Sales Growth Shows Surprise Rise On US Strength

Diageo reported a surprise rise in underlying net sales growth for the first half of its financial year, as strong demand at retail stores in the United States made up for weak business at bars and restaurants in Europe.

The United States accounts for nearly 45% of group profits and has been a bright spot for the world's largest spirits maker during the pandemic, with 80% of its sales coming from retail stores. In the other markets, bars and restaurants make up most of the sales.

'Rapidly Pivoted'

"We delivered a strong performance in a challenging operating environment, returning to top line organic sales growth during the half," commented Ivan Menezes, Diageo chief executive.

"We rapidly pivoted to the channels and occasions most relevant to consumers and invested behind new opportunities. This more than offset the impact of on-trade restrictions and the decline in Travel Retail."

The company reported a 1% rise in organic net sales growth for the six months to 30 December, compared with a drop of 4.6% that analysts had expected, according to company supplied estimates.

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Adjusted earnings fell nearly 13% to 69.9 pence per share, but beat the 67.8 pence analysts had expected, hurt by higher operating costs and a stronger pound.

Outlook

The Johnnie Walker whisky and Tanqueray gin maker stayed away from issuing any specific annual sales outlook, but said it expected organic operating profit growth in the second half to be ahead of organic net sales growth in all regions, except in North America.

"The medium and long-term growth drivers and opportunities for our business remain intact and I am confident in our strategy, the resilience of our business and Diageo’s ability to emerge stronger," Menezes added.

The company also raised its interim dividend by 2% to 27.96 pence per share.

News by Reuters, edited by ESM. Click subscribe to sign up to ESM: European Supermarket Magazine.

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