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Diageo plc (NYSE:DEO) slumped in Friday morning trading after the alcoholic beverage giant issued a trading statement.
The company noted that it has momentum continuing in four of five regions, but warned of a materially weaker performance outlook in Latin America and Caribbean, which is nearly 11% of Diageo’s (DEO) net sales value. The region is now expected to see organic net sales decline by more than 20% year-over-year in the first half of fiscal 24.
“LAC is lapping very strong 20% organic net sales growth, versus the first half of fiscal 23. Macroeconomic pressures in the region are resulting in lower consumption and consumer downtrading. These impacts are slowing down progress in reducing channel inventory to appropriate levels for the current environment. Despite slowing category growth, our business continues to win share in most markets, within the categories we participate in.”
For the North America business, Diageo (DEO) expects gradual improvement in organic sales growth in the first half of FY24 compared to the second half of FY23, while maintaining distributor inventory in line with historical levels. The company also expects to see improvement in the rate of sales growth in Africa in the first half of FY24 compared to the second half of FY23. In Europe and Asia Pacific, DEO sees continued momentum, although slower than in the second half of FY23.
Looking ahead to the second half of FY24, Diageo (DEO) expects to see a gradual improvement in organic sales and organic operating profit growth from the first half. Diageo (DEO) plans to continue to invest in marketing and the business to drive long-term sustainable growth.
On Wall Street, Cowen analyst Vivien Azer said that while Diageo (DEO) noted that productivity initiatives should result in operating leverage over time, management would not point to specific timing for the inflection. The firm kept a Market Perform rating in place.
Shares of Diageo fell 14.55% in premarket action on Friday to $136.57, which is a fresh 52-week low for the stock.