Diageo removes medium-term guidance on U.S. tariff uncertainty

Spirits maker Diageo said Tuesday that it is taking steps to deal with the potential impact of U.S. tariffs on key supply chain regions and has removed its medium-term guidance due to macroeconomic and geopolitical uncertainty.

CEO Debra Crew said the prospect of tariffs could hamper the firm’s efforts to recover falling sales and that it had added “further complexity” to its ability to provide updated guidance.

Diageo had previously forecast medium-term organic sales growth of between 5% and 7%.

“We are taking a number of actions to mitigate the impact and disruption to our business that tariffs may cause, and we will also continue to engage with the U.S. administration on the broader impact that this will have on everyone supporting the U.S. hospitality industry, including consumers, employees, distributors, restaurants, bars and other retail outlets,” Crew said in a statement accompanying the firm’s interim earnings.

In a Tuesday earnings call, Chief Financial Officer Nik Jhangiani said that the implementation of U.S. tariffs was expected and that the firm was taking and would continue to implement a number of actions to mitigate the impact. Such measures include pricing strategies, inventory management, supply chain adaptation and reallocation of investment.

Further updates will be provided when management can “more accurately forecast the financial impact of tariffs,” he added.

The FTSE 100-listed company posted a 0.6% decline in first-half reported sales to $10.9 billion, coming in slightly ahead of the $10.7 billion estimated by analysts in an LSEG poll.

Spirits brands including Tanqueray, Gordon’s and Smirnoff saw the steepest declines in net sales, while Guinness was a clear outlier, posting double-digit growth for an eighth consecutive half-year period.

The drinks maker has come under pressure from investors amid falling sales, management changes, the rise of weight-loss drugs — which may be able to reduce alcohol consumption — and a broader trend toward low- and no-alcohol products.

Shares of Diageo — whose brands include Johnnie Walker, Captain Morgan and Don Julio — fell 3% Monday amid a wider global sell-off, as investors assessed the economic impact of Trump’s tariffs on imports from Canada, Mexico and China.

Almost half (46.2%) of Diageo’s U.S. sales are derived from imports from Mexico and Canada, including brands such as Crown Royal, Don Julio and Casamigos, Jefferies analysts estimated in a note Sunday.

That compares to the just over one-third (35.3%) of U.S. sales imported from Mexico and Canada for Italy’s Campari Group and the 6% equivalent for France’s Pernod Ricard.

As such, Diageo could be expected to hike prices for U.S. consumers by around 4.6% — and that’s before any possible new tariffs on EU goods, the analysts said.

In 2024, Diageo reported its first drop in global sales since the start of 2020. Sales fell 1.4% to $20.3 billion in the year ended June. It followed a prior profit warning in November 2023 which showed declining sales in Latin America, the Caribbean and the U.S.

Diageo shares are currently languishing near pandemic-era lows, despite briefly climbing last month on reports that it was it was considering the sale of its Guinness beer brand — a top performer in the group’s portfolio — or its stake in LVMH‘s drinks unit Moet Hennessy.

In a statement released Jan. 26, the firm said it had “no intention to sell either,” sending the stock lower again.