Global beer and spirits giant Diageo PLC (LSE:DGE) chalked up a surprising gain on the London Stock Exchange today, despite the Smirnoff, Johnnie Walker, Guinness and many other cornerstone booze brands owner delivering another cautious trading update.
“The global environment remains challenging for both our industry and Diageo,” said chief executive Debra Crew.
Consumers “continue to be cautious in this environment”, she added, though she talked of “strengthening the resilience of our business through operational excellence, productivity and strategic investments to win quality market share”.
Despite sounding less than cheery, the results prompted a 4.5% rally on the stock, yet remains 15% lower year on year and more than a third lower since its 2022 peak.
A lot has been said of Diageo’s premiumisation problem- following a pandemic-era shift to high-end beverages such as Johnnie Walker Blue and single malt whiskeys, premium drinks sales have steadily declined.
On top of a sharp reversal in Diageo’s high-margin LATAM and Caribbean segments, there appears to be much to be concerned about among Diageo shareholders.
There are also bright spots to be found- Guinness sales are strong and Diageo has been on top of the trend shift towards alcohol-free beer and spirits options (not least with the release of Guinness 0).
“Even so, the developments over the last year have taken the sheen from a stock traditionally regarded as a core portfolio constituent,” said interactive investor’s head of markets Richard Hunter.
“The shares have jumped because of the absence of further bad news, rather than evidence of a turnaround,” added AJ Bell’s investment director Russ Mould.
Mould also suggested that “if Diageo remains in the doldrums for much longer it could attract activist interest or potentially a takeover bid”.
It would certainly mirror a theme prevalent in the London capital markets scene of largest international rivals snapping up cheap British companies.
Diageo’s FTSE 100-listed compatriot Rightmove PLC (LSE:RMV) is the latest to attract such attention, this time from Murdoch’s REA Group.
Rightmove has refused to play ball, leaving the prospect of a hostile takeover on the cards.
Even British oil supermajor BP plc is subject to takeover rumours.
The prospect of a big-ticket bid for Diageo is nowhere near out of the question.