Key Takeaways
Spirits giant Diageo Plc reported a surprise 0.3% increase in third-quarter organic net sales, defying analyst expectations as the new chief executive officer tackles a sharp downturn in the U.S.
"We are taking decisive steps to enhance our competitiveness in North America," CEO Dave Lewis, who took the top job at the start of the year, said in a statement.
The modest growth was a significant beat on the 2.3% decline analysts had forecast. The maker of Johnnie Walker whisky and Guinness beer is struggling with a sales slump in North America and Asia, which was offset by robust demand in Europe and Latin America. The company did not disclose specific earnings per share figures for the quarter.
Shares of Diageo (DEO) have fallen nearly 30% over the past year. The company's ability to execute a turnaround in its largest market, the U.S., while navigating declining sales in China, is the central challenge for its new leadership.
The U.S., which accounts for nearly a third of Diageo's business, has been a major drag on performance. Retailers over-ordered tequila after a pandemic-era boom, while consumers shifted to cheaper brands, pressuring Diageo's premium-focused strategy. In the first half of fiscal 2026, North American sales fell 7%.
To stabilize the business, Lewis, known for cost-cutting at previous roles, has already reduced the company's dividend by 80% and initiated workforce reductions. The company is now focused on rebalancing inventory, adjusting prices, and investing in the fast-growing canned cocktail market. Diageo maintained its forecast for a 2% to 3% decline in organic net sales for the full fiscal year.
The results show early signs that efforts to stabilize the business may be taking hold, but the path to recovery remains challenging. Investors will look for concrete signs of a U.S. market recovery in the company's full-year earnings report in the coming months.
This article is for informational purposes only and does not constitute investment advice.
