Diageo's US problems temper third-quarter sales beat
Diageo's Third-Quarter Performance and Strategic Outlook
By Yadarisa Shabong and Emma Rumney
Sales Results and Market Reactions
May 6 (Reuters) - Diageo beat third-quarter sales expectations on Wednesday, but continued weakness in North America underscored the scale of the challenge facing new CEO Dave Lewis.
Organic Growth and Regional Drivers
The world's largest spirits maker posted 0.3% organic growth in net sales, confounding forecasts for a 2.3% drop, helped by strong Guinness demand in Britain and Ireland and stocking up ahead of the soccer World Cup in Latin America and the Caribbean.
Share Price Impact
The surprise beat gives Lewis an early boost. Shares in the Johnny Walker whisky maker rose more than 6% in early trade.
Challenges in North America
Sales Decline in the US
But performance in the United States, Diageo's biggest market, remained a drag, with North American sales down a further 9.4%.
CEO's Response and Actions
"North America remains our biggest challenge, where market conditions are soft and our offer needs to be more competitive. Actions are already underway to address this," Lewis, who took over in January, said in a statement. He gave no details.
Upcoming Strategic Plans
LEWIS TO LAY OUT STRATEGY IN AUGUST
Leadership Transition and Investor Sentiment
Background on CEO Appointment
Lewis' appointment has raised hopes of a turnaround after years of flat or falling sales and mounting investor frustration under predecessor Debra Crew.
Cost-Cutting Measures
Nicknamed "Drastic Dave" for aggressive cost‑cutting at Tesco and Unilever, Lewis has moved quickly at Diageo, cutting its sales forecast and halving the interim dividend in February.
Strategic Timeline
He said on Wednesday he remained on track to set out a full strategy in August.
Analyst and Market Commentary
Analyst Perspective
Diageo's third‑quarter performance lends some support to Lewis's claim that steps are being taken to address North America, RBC Capital analyst James Edwardes Jones said in a note.
Outlook for US Market Recovery
However, he added: "Given the importance of the U.S. to Diageo, it would be flippant to argue that things are on the mend yet."
Reporting and Editing Credits
(Reporting by Yadarisa Shabong in Bengaluru. Editing by Elaine Hardcastle and Mark Potter)
