Diageo slashes profit guidance again after US and Chinese sales dry up

Drinks giant Diageo has cut its sales and profit forecasts again as the embattled Guinness-owner flagged dwindling demand in China and the US.  

The FTSE 100 firm, which also owns Smirnoff vodka and Captain Morgan rum, told shareholder operating profit growth is set to be in the low to mid single-digit range for the year to June 2026, down from its previous guidance of mid single digits.

Sales were now likely to contract compared to 2025, against previous expectations of flat sales, the business added. 

Diageo shares were down 3.76 per cent or 67.50p to 1,730.00p on Thursday, having fallen by nearly a quarter in the past year.  

The drinks group has been under mounting pressure to fill its leadership vacuum and has been struggling since former chief executive Ivan Menezes died in 2023. 

Cut forecasts: Diageo has cut its sales and profit forecasts amid dwindling demand in China and the US

Nik Jhangiani, interim chief executive, said the group’s board of directors was ‘not satisfied’ with the company’s performance. 

Diageo reported net sales of £3.75billion between July and September, down 2.2 per cent from £3.83billion the previous year. Average prices for its products in Europe jumped by 5.3 per cent. 

In North America, the firm’s sales slipped 3.5 per cent, while sales across the Asia Pacific fell 9.7 per cent year-on-year, offsetting growth of around 5 per cent in Europe. 

In the US, consumer spending was more cautious than Diageo was expecting, leading to a tougher market for spirits.

Diageo flagged greater pressure from rivals, particularly across tequila lines , which saw sales slip by ‘double digits’ in the company’s fiscal first quarter. 

Under pressure: Nik Jhangiani is the interim chief executive of Diageo 

The London-listed business said it saw a sharp drop in the value and volume of sales in China, with demand also dwindling for white spirits such as baijiu. 

However, Diageo saw sales growth across its Guinness and Johnnie Walker scotch brands, as well as branded cocktails and ready-to-drink labels such as Smirnoff Ice.

Diageo said it was expecting organic net sales to be flat or slightly down over the full year, compared with the previous year. 

The business reaffirmed its plan to cut around £478million from its costs over the next three years.  

Jhangiani said: ‘Net sales were flat organically in Q1, with growth in Europe, LAC and Africa offset by weakness in Chinese white spirits and a softer US consumer environment than planned for. 

‘We are not satisfied with our current performance and are focused on what we can manage and control; acting with speed to drive efficiencies, prioritising investment and adapting more quickly to an evolving consumer environment.’ 

Russ Mould, investment director at AJ Bell, said: ‘Shareholders in Diageo have been left drowning their sorrows again as the drinks giant served up another disappointment in a year littered with them.’

Garry White, chief investment commentator at Charles Stanley, said: ‘The shares are sitting at a ten-year low after losing more than half their value since the end of 2021.

‘This is a company that is crying out for a good new management team with the talent to deal with the many challenges it faces.’

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