Diageo posts 1.2% sales growth despite weakness in North America

Diageo said on Thursday, November 5, that net sales rose 1.2% to $4.93 billion in its fiscal first quarter, as growth in Latin America, Asia Pacific, India and parts of Africa, Europe and the Middle East helped offset continued weakness in North America.

In a trading statement for the quarter ended September 30, the London-based drinks group said organic net sales increased 1.4% from a year earlier. Excluding the effect of EABL, organic net sales grew 0.6%, with volume down 0.1% and price and mix up 0.7%. Diageo said positive organic growth was partly offset by unfavorable foreign exchange movements and the effect of disposals.

The company said Latin America and the Caribbean and Asia Pacific delivered mid-single-digit organic growth. India and Europe, the Middle East and Africa posted low-single-digit gains. North America, however, recorded a mid-single-digit decline in organic net sales, which Diageo linked to continued softness in the market. In its corporate segment, EABL delivered double-digit growth and added 0.8 percentage points to group organic net sales.

By category, Diageo said whisky, Guinness and Smirnoff ready-to-drink products grew during the quarter. The figures suggest consumers are still spending in several parts of the world, but they also point to an uneven recovery across the drinks business, with beer and spirits demand stronger in some emerging markets than in the United States.

Chief Executive Dave Lewis said the first-quarter performance was in line with the company’s expectations and that Diageo was keeping its full-year outlook unchanged. He said the company was encouraged by growth in Latin America, Europe, Africa, Asia Pacific and India, while North America remained the group’s biggest challenge. Lewis also said the market was still difficult and that geopolitical uncertainty, including the continuing conflict in the Middle East, was adding volatility through energy, supply and distribution costs.

Diageo said it still expects broadly flat organic net sales growth for the full 2027 fiscal year. It forecast low- to mid-single-digit organic operating profit growth and said that outlook includes about 40% of the roughly $850 million in savings targeted through operating framework changes and about 25% of the roughly $150 million in savings planned through supply chain initiatives.

The company’s guidance assumes North America organic net sales will decline by a mid-single-digit rate over the full year, based on an expected market decline of about 3%, while Diageo’s share performance improves compared with fiscal 2026. That makes the update important for the broader beverage sector, because Diageo’s scale in spirits and beer gives investors, distributors and rivals a closely watched signal on consumer demand, pricing power and cost discipline. Continued weakness in North America is also likely to keep pressure on large drinks suppliers that rely on the region for growth.

Diageo said it expects its tax rate before exceptional items to be about 25%, up from 24.3% in fiscal 2026, and its effective interest rate to be about 4.0%, compared with 3.9% a year earlier. Capital spending is expected to be about $1.25 billion, compared with $1.2 billion in fiscal 2026.

The group said it expects free cash flow of about $2 billion in fiscal 2027, down from $3.2 billion in fiscal 2026, after roughly $850 million in exceptional cash costs tied to operating framework changes and the supply chain savings effort, and excluding cash from EABL. It also said it expects to finish fiscal 2027 around the midpoint of its target leverage range of 2.5 to 3.0 times net debt to adjusted EBITDA, assuming planned transactions involving EABL and Royal Challengers Bengaluru are completed.

Diageo said the quarterly figures are unaudited. It also said prior-year regional figures have been restated to reflect a new regional reporting structure introduced in fiscal 2027, with no change to group results. Lewis and Chief Financial Officer Nik Jhangiani were scheduled to discuss the results with analysts and investors later on Thursday, November 5.