U.K. spirits maker Diageo said that economic and political uncertainty in its key markets could affect the pace of its recovery, as distillers struggle with subdued overall demand for alcohol after the pandemic-era boom.

Diageo's Mid-Term Guidance Removal Is Positive Given Unrealistic Expectations

0846 GMT - Diageo's withdrawal of its mid-term target is broadly positive given that it brings the company's aspirations to a more realistic level, RBC Capital Markets' James Edwardes Jones and Wassachon Udomsilpa say. The owner of Johnnie Walker, Guinness and Smirnoff reported a positive performance for the first half, ahead of market expectations. Meanwhile, full-year guidance reflects a sequential increase in organic sales growth and a slight decline in organic EBIT, the analysts write in a note. The guidance removal is welcome as it led to unrealistic investor expectations and sub-optimal management decisions designed to support an unfeasible growth aspiration. The target has been replaced by more comprehensive short-term guidance with the promise of improved productivity efforts and tighter capital discipline, they say. Shares are down 2.7% and nearly 20% over the 52-week period. (michael.susin@wsj.com)

Diageo's Performance Seen as Positive, Guidance Withdraw Acceptable

0853 GMT - Diageo's 1H performance was satisfactory and likely exceeded market expectations, with signs of stabilization as sales were up by 1% and profits down by 1%, Quilter Cheviot's Chris Beckett says. Diageo's decision to remove medium-term guidance of 5%-7% organic sales growth might upset some investors. However, this move is acceptable given that the target was laid during the pandemic--when demand for alcohol was exceptionally high--and unrealistic given the current environment, Beckett writes in a note. Additionally, the owner of Johnnie Walker, Guinness and Smirnoff seems to be effectively managing its significant debt, given that the dividend remained unchanged amid concerns of a potential cut, Beckett says. Diageo's 2H performance is likely to be similar if U.S. tariffs are not imposed, he adds. Shares are down 3.3% and nearly 20% over the last 52 weeks. (michael.susin@wsj.com)

Diageo's Results Show Progress But U.S. Tariffs Remain a Question Mark

0958 GMT - Diageo's first-half results show consistent progress, mostly in line with the company's guidance and market expectations, but uncertainty remains in the U.S., Stifel analyst Cedric Lecasble says in a research note. The U.K. spirits maker booked net sales of $10.90 billion in the six months to Dec. 31, up 1% organically on year. "Meeting expectations in this dull environment is an already solid performance, but U.S. tariffs remain the main question mark," he says. The analyst welcomed the group's decision to withdraw its medium-term outlook of organic net sales growth between 5% and 7%, as the target seemed more and more challenging in the current environment. Shares are down 3.7% at 22.78 pounds. (andrea.figueras@wsj.com)

Diageo's Prospects Are a Glass Half Empty

1041 GMT - Diageo faces a testing time, and its challenges are leading to a pessimistic outlook, says Richard Hunter, head of markets at Interactive Investor. The U.K. distiller withdrew its midterm guidance of organic net sales growth between 5% and 7%. It also said it had expected to build on the momentum seen during the first half, but that the application of tariffs in the U.S. could affect this goal. The fact that Diageo imports an estimated 40% of its products for sale in the U.S. from Mexico and Canada is a significant overhang, Hunter says in a note. The products that are most affected by tariffs are tequila and Canadian whisky, which could leave the group with little option but to hike prices at a time when discretionary spend is under pressure, he says. Shares are down 0.7% at 23.48 pounds. (andrea.figueras@wsj.com)

Diageo Starts 2025 on Back Foot, AJ Bell Says

1334 GMT - Diageo has had little to toast so far in 2025, AJ Bell's Russ Mould says in a note. First the calls from U.S. surgeon general for warnings about the health impacts of alcohol consumption and now it has withdrawn its medium-term guidance. The Guinness beer owner scrapped its midterm outlook of organic net sales growth of between 5% and 7%, citing uncertainty in key markets. The company said U.S. tariffs would affect the Mexican tequila and Canadian whisky it sells in the U.S. AJ Bell's investment director says the group will be relieved to see the imposition of tariffs for these two countries delayed for now, as imports from these countries account for a good chunk of Diageo's U.S. sales. Shares are down 0.7% at 23.49 pounds. (andrea.figueras@wsj.com)

(END) Dow Jones Newswires

February 04, 2025 09:05 ET (14:05 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.