Diageo Plc shares dropped after the Johnnie Walker maker reported a slowdown in sales in North America, raising concern that a key motor for earnings growth is weakening.
(Bloomberg) — Diageo Plc shares dropped after the Johnnie Walker maker reported a slowdown in sales in North America, raising concern that a key motor for earnings growth is weakening.
Sales rose 3% on an organic basis in North America in the six months through December, missing estimates. The region was the source of about half of Diageo’s earnings last year. Diageo shares fell as much as 6.1%
“We think that the US miss is the most significant element of these results,” wrote analysts at RBC.
The slowdown there overshadowed a beat in total sales growth, which reached 9.4% on an organic basis. However, volumes rose slightly less than analysts expected, which could be a signal that Diageo’s pricing power has limits.
Diageo has raised prices in some markets less than the rate of inflation, as it’s relying on productivity improvements, a better sales mix and higher volumes to help offset higher raw material costs.
The company maintained its forecast for annual growth of 5% to 7% in sales and 6% to 9% in operating profit in the three years through fiscal 2025, on an organic basis.
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Volume dropped 4% in North America, led by vodka, Canadian whisky and Scotch.
–With assistance from Anna Edwards.
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