Citi’s latest note on Diageo PLC (LSE:DGE), maker of Guinness and Smirnoff vodka, makes for a sober read. The broker expects first-quarter organic sales growth to fall 1.3%, in line with consensus, and warns that full-year guidance is likely to be cut to “flattish” when the company updates investors.
A combination of factors is weighing on performance. US sell-out data from Nielsen points to continued weak demand, particularly across premium spirits, even if inventory building ahead of potential tariffs provides a temporary lift.
In China, tighter rules on alcohol consumption in restaurants and bars are adding further pressure, leaving Asia trading soft overall.
Citi now forecasts group organic sales growth of less than 1% for the 2026 financial year, well below management’s existing target of around 1.7%.
With little sign of improvement in the key October-to-December trading period, which includes the crucial holiday season, the analysts believe Diageo will need to temper its expectations when it reports.
The broker sees few near-term catalysts for a re-rating, given the slowdown in the company’s largest markets and ongoing challenges in China.
However, the likely confirmation of interim chief executive Debra Crew in the role permanently could provide some stability, while asset disposals remain a potential route to easing leverage.
After a difficult year marked by profit warnings and a fragile recovery in consumer spending, Citi’s note suggests investors may need to wait longer before Diageo’s top-line growth regains its usual sparkle.