Diageo just missed full-year profit forecasts on Tuesday and warned challenges could persist into next year as sales sank in Latin America and the Caribbean.
Shares for the spirits maker fell by more than 9% on Tuesday.
The maker of Johnnie Walker and Tanqueray gin has struggled to restore investor confidence after unsold inventory in Mexico and Brazil led to a profit warning and a loss of market share in the United States, its biggest territory.
Diageo attributed the 4.8% decline in its annual organic operating profit largely to a 21.1% slump in sales in Latin America and the Caribbean, a high-margin region.
The slump was slightly deeper than the company had expected.
'Controlling What We Can'
Chief executive of Diageo Debra Crew said the company had taken steps to resolve problems in the region and beyond, which she was confident would ultimately restore growth.
However, Crew said it was difficult to say when the company would see net sale increases of between 5% and 7% per year – its medium-term goal.
Crew said, “It’s really hard to call… what we are doing is controlling what we can.”
She added that factors such as low consumer confidence and high inflation also impacted sales.
An analyst from RBC Capital James Edwardes Jones said this was “not reassuring” given comments from other consumers companies, which have wanted that US consumer confidence is under pressure.
Edwardes Jones said, “We expected these results to be grim, and so they were.”
Some analysts and investors have called Diageo’s medium-term sales guidance too ambitious.
Like peers such as Remy Cointreau, the company endured a dramatic reversal of a post-pandemic sales boom, leaving it with too much stock gathering dust in many markets as customers reined in spending on expensive spirits.
In North America, the company’s sales fell 3%.
Crew said Diageo has largely normalised its US stock levels, but consumers remain cautious.
Analysts had expected a 4.5% fall in annual operating profit.
Diageo had previously said sales in Latin America and the Caribbean would fall by between 10% and 20%.
Overall, group net sales were also slightly worse than originally forecast, declining 0.6% organically.
