Diageo PLC (LSE:DGE) reported flat organic net sales in the first quarter of its new financial year, as lower demand in China and a weaker US consumer environment offset growth in Europe, Latin America and Africa.
The FTSE 100-listed maker of Guinness, Smirnoff and Johnnie Walker said it expects to be able to mitigate "around half" of the impact of US and European tariffs on operating profit.
Net sales for the quarter to 30 September 2025 came in at $4.88 billion, matching market expectations, but organic net sales were flat, which was better than the City consensus forecast for a 1.1% decline.
Organic volume grew 2.9%, but this was fully offset by a negative 2.8% price/mix impact, largely due to lower sales of Chinese white spirits.
North America net sales were $1.85 billion, slightly ahead of the $1.82 billion estimate, despite continued weakness in US spirits consumption and tough comparatives in tequila.
Interim chief executive Nik Jhangiani said: “Net sales were flat organically in Q1, with growth in Europe, LAC and Africa offset by weakness in Chinese white spirits and a softer US consumer environment than planned for.”
He said the Accelerate cost-saving programme remained on track to deliver around $625 million in savings over three years.
Full-year guidance was maintained for roughly $3 billion in free cash flow for the current 2026 financial year.
Guidance for the expected impact of tariffs on the US from UK and European imports remained unchanged at around $200 million a year, before any mitigation and assuming current tariffs remain.
Currently, there are 10% on imports from the UK and 15% on imports from Europe, with Mexican and Canadian spirits imports remaining exempt under USMCA.
"Given the actions to date and before any pricing, we expect to be able to mitigate around half of this impact on operating profit on an ongoing basis."