Profits at FTSE 100 behemoth Diageo have tumbled well below forecasts as elevated expenses batter the beverages colossus.
Net revenues declined 0.1 per cent to $20.24bn (£15.24bn), the company announced to markets this morning, undershooting analysts’ projections of 1.4 per cent growth, as reported by City AM.
The firm anticipates next year’s organic revenue growth to remain flat, with organic operating profit expansion expected in the mid-single-digits, incorporating tariff impacts.
Operating profits for 2025 plummeted 27.8 per cent to $4.33bn year-on-year, significantly beneath the operating profits of $5.65bn (£4.25bn) that City experts had forecast.
The operating profit margin contracted 8.19 per cent to 21.4 per cent, which Diageo attributed to “exceptional impairment and restructuring costs.”
“While we are encouraged by areas of progress… there is clearly much more to do across our broader portfolio and brands,” interim chief executive Nik Jhangiani stated.
“We recognise the need to drive meaningful growth opportunities [and] we are sharpening our strategy to accelerate growth,” he continued.
In July, the FTSE 100 titan revealed it would replace then-boss Debra Crew barely a year into her stint, with then-finance director Jhangiani assuming the position whilst the business searches for a permanent replacement.
Crew had presided over a turbulent period at Diageo, having been compelled to issue an earnings warning merely five months into her role after the company misjudged sales patterns in Latin America – a crucial market – resulting in a sharp reduction in profit guidance. Since Debra Crew took the helm, shares in Diageo have plummeted by 43 per cent, as the post-pandemic surge in premium spirits has been replaced by weaker demand and global economic uncertainty.
The FTSE 100 drinks behemoth also revealed plans to increase its cost-cutting targets to $625m in response to falling profits, up from $500m.
Guinness shows double-digit growth
Diageo’s standout brands, including Don Julio, Guinness and Johnnie Walker, have all gained market share over the past year, with the first two experiencing double-digit growth.
Guinness is being touted as a means for Diageo to counterbalance its struggling spirits business, as demand for the beverage has soared in recent years due to a surge in popularity among Gen Z on social media.
There has been speculation that Diageo might spin off Guinness as part of a comprehensive cost-cutting plan, but so far, there is no concrete evidence to support this decision.
Robinhood UK’s lead analyst, Dan Lane, commented: “The fact that [overall] profits and margins have struggled so much, even at the height of Guinness’s popularity, has quite rightly sounded alarm bells.”
He added: “The bull case around Diageo was that younger people were drinking less but upping the quality, except higher inflation has meant consumers can’t quite reach the top shelf anymore and are seemingly trading down as well as slowing down.”
