Updated January 30th, 2024 at 13:08 IST
Diageo faces sales setback in Latin America, misses first-half estimates
Diageo, renowned for brands like Johnnie Walker whisky and Tanquery gin, reported a 0.6 per cent decline in organic net sales
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The world's leading spirits manufacturer, Diageo, fell short of first-half sales expectations, primarily due to a major downturn in Latin America impacting its overall performance.
Diageo, renowned for brands like Johnnie Walker whisky and Tanquery gin, reported a 0.6 per cent decline in organic net sales, slightly below analyst projections of flat organic sales, according to a company-compiled consensus.
The warning issued by Diageo in November about an anticipated over 20 per cent drop in sales in Latin America and the Caribbean, attributed to an excess of unsold stock in Mexico and Brazil, where consumers were opting for less premium spirits, adversely affected the company's standing.
The development eroded investor confidence, with some shareholders expressing dissatisfaction with the handling of the situation by CEO Debra Crew, who recently assumed the leadership role.
In response to the challenges, Crew stated, "We have taken action and have further plans to reduce inventory to more appropriate levels for the current consumer environment in the region by the end of fiscal 24," emphasizing that this is a top priority.
Sales in the Latin American region witnessed 23 per cent decline. Excluding this impact, organic net sales saw growth of 2.5 per cent, driven by Asia Pacific, Europe, and Africa, while North America witnessed a 1.5 per cent decline.
The organic operating profit took a hit, falling by 5.4 per cent, a more significant drop than the 4.7 per cent decline anticipated by analysts.
Despite the challenges, Diageo remains optimistic, stating that it anticipates an improvement in organic net sales growth in the second half of the financial year.
(With Reuters inputs)
Published January 30th, 2024 at 13:08 IST