Johnnie Walker owner Diageo to reveal sales slowdown

The group, which also makes Guinness, reveals its half-year update to shareholders on Thursday January 26.

Henry Saker-Clark
Friday 20 January 2023 10:26 EST
File photo dated 16/04/18 of Ivan Menezes, chief executive of Diageo (Andrew Milligan/PA)
File photo dated 16/04/18 of Ivan Menezes, chief executive of Diageo (Andrew Milligan/PA) (PA Wire)

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Spirits giant Diageo is expected to report a slowdown in sales and profits next week as consumer spending steadies.

However, analysts have predicted that the Johnnie Walker and Baileys maker could deliver a resilient showing when it reveals its half-year update to shareholders on Thursday January 26.

A consensus of analysts have predicted that the group is likely to deliver organic net sales growth of 7.9% for the past six months.

As a result, it is also expected to record an operating profit increase of around 7.6%.

However, this will represent a slowdown from 18.2% growth in the previous financial year after a strong showing.

The group, which also owns stout brand Guinness, is among consumer firms to have come under increased pressure from the higher cost-of-living for shoppers and its own increased cost inflation.

It saw sales a year ago jump as restaurants, pubs and bars reopened to strong pent-up demand.

Derren Nathan, head of equity research at Hargreaves Lansdown, said: “Last year’s performance benefited from double-digit growth in both price/mix and volumes.

“Drivers included strong demand from drinkers retuning to pubs and restaurants, and a particularly good result from Diageo’s higher end brands.”

Investors will be optimistic that its broad range of products and regions could provide resilience.

The group has seen particular success in recent years through investing in more premium brands, following a consumer trend which has so far appeared to remain solid despite the wider consumer downturn.

Jefferies equity analyst Edward Mundy said: “The medium-term outlook for spirits remains favourable and we think premiumisation trends and share-of-throat gains will largely be sticky as the dust starts to settle post-Covid.

“For middle and upper-income groups, premium spirits remain both desirable and an affordable luxury; however, where consumers purchase, what they buy and how they shop may start to evolve.”

In July, the group provided a cautious outlook statement alongside its full-year results due to continued cost inflation and geopolitical uncertainty.

Investors will be hopeful of a more positive outlook as global inflation pulls back slightly, with hopes its pricing position can offset increases.

AJ Bell’s Russ Mould said: “The company’s brands may offer it some protection against input cost inflation thanks to the pricing power that they bring.”

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