Diageo Beats Expectations With 0.6% Sales Growth

Diageo reported organic net sales growth of 0.6 per cent for the three months ended September 30th. Analysts polled by the company had predicted a 0.4 per cent decline for the same period.

The results were driven by a slower than expected drop in North America, the company's largest market. Organic net sales in that region fell 3.6 per cent. Analysts had projected a 6.7 per cent decrease.

In Europe, the Middle East and Africa, organic net sales rose 2.4 per cent. Volumes in that region increased by 4.4 per cent, while pricing fell 2 per cent due to targeted price repositioning. Growth in Turkey, Africa and the Middle East offset weakness in Italy and France.

Spirits and ready-to-drink products led the regional growth. Johnnie Walker recorded double-digit growth, and Baileys achieved mid-single-digit gains. These increases counteracted declines in the Smirnoff and Tanqueray brands.

The beer sector saw low-single-digit growth. Guinness sales declined in Britain and Ireland, a trend the company attributed to hotter weather and increased competition. Growth in Africa and central European countries helped offset that decline.

Chief executive Dave Lewis, who took over at the start of the year, called the first-quarter results a small step in the right direction. He said making the company's offer more competitive remains the biggest challenge, though clear actions are under way. Lewis noted that the market remains challenging, citing geopolitical uncertainty and the impact of the ongoing conflict in the Middle East on energy, supply and distribution.

Diageo has kept its organic net sales outlook broadly flat for the year. The company is implementing a turnaround plan aimed at saving about $1 billion. That strategy includes cutting jobs, and the annual report published in August showed the company had 2,000 fewer staff than the previous year.