Diageo missed estimates due to declining sales in Latin America
Spirits maker Diageo has introduced it Profit expectations The full year was not achieved due to a decline in sales in Latin America and the Caribbean. The company saw a 4.8 percent decline in annual organic operating profit, missing estimates by 0.3 percentage points.
The sales decline was due to a 21.1 percent decline in the high-margin region of Latin America and the Caribbean. As a result, shares fell 8 percent in early trade.
Challenges persist
Diageo’s CEO, Debra Crews, said steps were being taken to address issues in the region and elsewhere to improve efficiency. While these efforts may eventually return the company to growth, it is difficult to predict when net sales will increase by 5 percent to 7 percent annually.
Factors such as low consumer confidence and high inflation also weighed on sales, the team highlighted. “It’s very difficult to say…we can only control what we can do,” she said.
Analysts were not impressed
RBC Capital analyst James Edwards Jones was unconvinced by Diageo’s comments. He pointed to similar warnings from other consumer organizations about a lack of consumer confidence in the United States. “We expected these results to be bad, and they were,” he said.
Although estimates were missing, analysts expected a bigger annual decline in operating profit of 4.5 percent. Diageo had previously forecast a 10 percent to 20 percent drop in sales in Latin America and the Caribbean.
Net sales decline
Overall, the group’s net sales were slightly worse than forecast, with an organic drop of 0.6 percent.
In a statement, Diageo stressed that it was taking steps to address the challenges and was confident in its ability to recover. The company has yet to provide any guidance on next year’s performance.
Key takeaways
- Diageo missed its full-year profit forecast due to slumping sales in Latin America and the Caribbean.
- Shares fell 8 percent in early trade.
- CEO Debra Crews stressed that steps are being taken to address the problems, but recovery is uncertain.
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