Diageo withdrew its medium-term organic sales growth target on Tuesday as the world’s top spirits maker took steps to try and mitigate the impact of US tariffs on its tequila and Canadian whiskey.
Shares of the maker Johnnie Walker whiskey and Don Julio tequila dropped 2.5% in early trade, hitting its lowest level since 6 November.
This made Diageo one of the biggest losers on London’s FTSE100 on Tuesday.
New finance chief Nik Jhangiani told journalists he expected a gross impact of around $200 million on the company’s operating profit for the current financial year, mostly from tequila, if tariffs are implemented from 1 March.
The company said it scrapped its medium-term organic net sales growth of 5% to 7% because macroeconomic and geopolitical uncertainty were hurting the pace of its recovery.
‘Further Complexity’
CEO Debra Crew said tariffs in the US announced over the weekend added to “further complexity in our ability to provide updated forward guidance.”
Over the weekend, US President Donald Trump imposed tariffs on China, Canada and Mexico – although on Monday he agreed to a 30-day pause on the tariffs for Canada and Mexico.
On Tuesday, China hit back by imposing tariffs of its own on some US goods.
Diageo said there were a number of possible actions it could take to help mitigate the impact of tariffs, including pricing, inventory management, re-allocation of investments and supply chain optimisation.
In a statement, Crew said, “We will… continue to engage with the US administration on the broader impact that this will have on… consumers, employees, distributors, restaurants, bars and other retail outlets.”
The company said its tequila made in Mexico and exported to the US would be the most hit by US tariffs.
It would also see a hit on its Canadian whiskey that it exports to the US.
Diageo added that the impending tariffs would impact input costs rather than the retail price.
Expectations
Diageo said its organic sales grew 1% in July to December 2024, beating a 0.4% increase expected by analysts in a company-compiled poll.
Investors had expected finance chief Jhangiani – who took office in September – to row back the company’s medium-term sales target given falling sales across the alcoholic beverages sector.
Analysts at RBC Capital Markets said in a note, “We welcome the removal of the medium-term guidance…. In our view this resulted in unrealistic expectation on the part of investors and sub-optimal management decisions designed to support an unfeasible growth aspiration.”
Consumers have remained cautious and the macroeconomic recovery is taking longer than expected, particularly in North America and China, Diageo said.
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