KEY TAKEAWAYS
- Diageo American depositary receipts (ADRs) are plunging Tuesday as its full-year sales through June were dragged lower by declines in Latin America and the Caribbean (LAC) and a weak North American market.
- CEO Debra Crew said Europe, Africa, and Asia Pacific growth was “resilient,” but “materially weaker” LAC sales and a “cautious consumer environment” in North America weighed on results.
- The company, whose brands include Johnny Walker, Guinness and Smirnoff, reported yearly net sales declined 1.4% to $20.3 billion.
Diageo (DEO) American depositary receipts (ADRs) plunged about 6% soon after the opening bell Tuesday after the alcoholic beverage giant posted a drop in its full-year sales through June, dragged lower by declines in Latin America and the Caribbean (LAC) and a weak North American market.
Chief Executive Officer (CEO) Debra Crew said while the British spirit firm’s growth in Europe, Africa, and Asia Pacific was “resilient,” its fiscal 2024 was hit by the “materially weaker” LAC sales and North American declines, “attributable to a cautious consumer environment and the impact of lapping inventory replenishment in the prior year.”
Diageo Says ‘Consumer Environment Continues To Be Challenging’
The company, whose brands include Johnnie Walker, Guinness and Smirnoff, reported yearly net sales declined 1.4% to $20.3 billion, and noted that the “consumer environment continues to be challenging with conditions we saw towards the end of fiscal 24 persisting into fiscal 25.”
The company also said it expects the “negative pressure on organic operating margin” it experienced in the second half of its 2024 fiscal year to persist into fiscal 2025.
Companies Including McDonald’s Face Heat From Tepid Consumer Demand
North American consumer weakness has been weighing on other companies this week. On Monday, McDonald’s (MCD) posted second-quarter earnings that fell short of analysts’ estimates as foot traffic slumped.
Consumer spending has been the engine of the economy during the recovery from the pandemic, but inflation has made shoppers more price sensitive. Consumers are cutting down on discretionary purchases or buying cheaper substitutes.