Why Diageo Stock Was Slipping Today

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Shares of Diageo (NYSE: DEO), the diversified alcohol leader and parent of brands like Johnnie Walker and Guinness, were pulling back today after the company posted disappointing results in its second-quarter earnings report, with particular weakness in the Americas.

As of 11:11 a.m. ET on Tuesday, the stock was down 5.3% on the news.

A bartender taking an order.
Image source: Getty Images.

The consumer slowdown hits Diageo

The report included preliminary results for the fiscal year ended on June 20 and said that overall revenue declined 1.4% for the period to $20.3 billion, which missed estimates at $21.2 billion. Organic sales, which excluded the impact of currency exchange and divestitures and acquisitions, were down 0.6%.

Overall volume sales in the quarter were down 5%, with declining growth in every region except Europe, where it was flat. Organic volume slipped 4% with declines in every region except Asia-Pacific, where it rose 1%.

On the bottom line, Diageo also struggled. Adjusted operating profit fell 5% on an organic basis to $5.9 billion, and the company reported adjusted earnings per share of $1.80, down from $1.97 in 2023.

In the earnings release, CEO Debra Crew said, "While Fiscal 24 was a challenging year for both our industry and Diageo with continued macroeconomic and geopolitical volatility, we focused on taking the actions needed to ensure Diageo is well-positioned for growth as the consumer environment improves."

Can Diageo recover?

Diageo is the largest diversified spirits company in the world with a wide range of brands, including Smirnoff, Captain Morgan, and Crown Royal, and the company's challenges seem to be more a reflection of weak consumer demand in the alcohol industry as Heineken posted disappointing results yesterday as well.

The company's outlook wasn't particularly optimistic for 2025, expecting that challenging conditions will persist into the new fiscal year. It did say it was confident that sales growth would improve when the demand environment recovers.

However, given that forecast, investors might want to pump the brakes on any plans to buy the stock.

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Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool recommends Diageo Plc. The Motley Fool has a disclosure policy.

Why Diageo Stock Was Slipping Today was originally published by The Motley Fool

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