Diageo Shares Sink on Cuts to Guidance, Dividend as New Boss Sets Sights on Turnaround

By Aimee Look and Joshua Kirby

Diageo shares fell after the Guinness maker cut its guidance for the year on weakness in the U.S. and slashed its dividend to help fund the turnaround plan of Chief Executive Officer Dave Lewis.

Home to brands like Johnnie Walker and Smirnoff, Diageo has been beleaguered by sales weakness over the past two years, as price inflation bites into consumers' spending power and growing health consciousness curbs appetites for boozing.

Lewis, the group's newly-installed CEO, said Wednesday that he would seek to build a larger portfolio in a bid to revive the U.K. drinks giant's fortunes. A dividend cut was needed to create more financial flexibility and strengthen the balance sheet, he said.

Diageo shares were down 6.2% in morning trading in London, making it the worst performer in the FTSE 100 index. However, the stock is still up nearly 10% since the start of 2026.

Diageo set an interim dividend of 20 U.S. cents a share, down from 40.50 cents a share for the first half of fiscal 2025. The company said its dividend for fiscal 2026 would be at least 50 cents.

"The North American market is challenged. Our portfolio needs some time and investment to make it more competitive," Lewis said.

People are consuming spirits in different ways, Lewis told analysts in a call following the update, pointing to the growing popularity of ready-to-drink canned cocktails as an example. "They're making choices about where and when to socialize that are different," he said. "We want to serve them where they want to be."

Diageo said it expects a 2% to 3% decline in organic net sales for the 2026 fiscal year. It previously anticipated sales to be flat or slightly down, citing weakness in its U.S. business and Chinese white spirits.

Its operating profit growth guidance for the fiscal year was also lowered, now anticipated to be flat to low-single-digits. Previously, the metric was expected to be in the low- to mid-single digit range.

This marked the drinks company's second cut to its fiscal 2026 expectations in as many quarters, after doing the same in the first quarter.

In the six months through December, organic net sales dropped 2.8% year-on-year. Analysts polled by the company had expected a 2% drop for the metric. Diageo said soft sales in North America, due to pressure on disposable income, offset strong growth in other regions like Europe.

Net sales fell 4% in reported terms to $10.46 billion.

The sales slide tracks many of Diageo's peers. Bud Light-maker AB InBev, the world's largest brewer, booked a continued fall in sales volumes over the last months of 2025. And Pernod Ricard, the French distiller that makes Absolut vodka and Jameson whiskey, signaled big drops in sales in the key U.S. and China markets over its own fiscal first half, leading to a 15% plunge in total revenue from a year earlier.

Lewis has his eye on broadening the company's portfolio, and is looking to explore new opportunities to boost growth, he said. Exploring new portfolio opportunities "might involve some price re-positioning," he said.

The CEO touted Diageo's Guinness brand for being a bright spot in its drinks portfolio, with robust growth across regions. The company might also consider selling some brands, but will remain discerning, he said.

"We will make disposals if appropriate, but we will not sell brands cheaply," Lewis said.

The CEO is known for the turnaround efforts he helped lead at British grocer Tesco and at consumer-goods group Unilever. He took the reins at Diageo at the beginning of the year after the drinks company in summer jettisoned then-CEO Debra Crew, who spent two years in the post. Under Crew's tenure, the company issued a profit warning that dealt an enduring blow to Diageo's share price.

Write to Aimee Look at [e-mail] and Joshua Kirby at [e-mail]

(END) Dow Jones Newswires

02-25-26 0705ET