By Geoffrey Smith
Investing.com — Diageo (LON:DGE) shares fell to their lowest in seven months on Thursday after the company said sales volumes fell in three of its most important markets at the end of 2022, as the company’s price increases proved too much for customers already struggling with high inflation.
Sales volumes fell 4% each in North America and Asia-Pacific, and 1% in Europe. While that didn’t stop revenue from growing by 18% and operating profit by 15%, the figures suggested that there could be limits to the company’s goal of ‘premiumization’.
Organic sales grew only 9%, with the rest coming from acquisitions. Analysts at JPMorgan Cazenove noted that earnings before interest and taxes were also some 2% short of market forecasts.
The numbers allowed Diageo to raise its interim dividend by another 5% to 30.83 pence a share, and to offer the prospect of up to another £500 million (£1 = $1.2389) in share buybacks by the end of June.
By 06:00 ET (11:00 GMT), Diageo stock was down 6.6% in London, while its warning also dragged down peers Pernod Ricard (EPA:PERP) and Rémy Cointreau (EPA:RCOP) by nearly 3% each in Paris trading.
Diageo is the world’s biggest spirits maker, owning brands such as Johnnie Walker whisky, Tanqueray gin, and Don Julio tequila, as well as Guinness and Baileys. The company has emerged from the pandemic in generally solid shape, after three years in which locked-down consumers released their frustrations at not being able to socialize partly by drinking more at home.