Diageo's knockout in London weighs on the sector, Campari slips to the bottom of the Ftse Mib

(Il Sole 24 Ore Radiocor) - Diageo cut guidance for the second time and cut its dividend, with the group suffering from weak demand in China and the United States. Ko the stock of whisky maker Johnnie Walker and Guinness beer in London down around six points. But the slide and the outlook also weighed on European competitors: in Milan the Davide Campari and in Paris Pernod Ricard was the black jersey with a drop of over 3%.

Diageo closed the first half of FY2025-2026 with revenues down 4% to IDR 10.46bn (-2.8% organically), doing worse than analysts' expectations. Adjusted earnings per share also fell: -2.5% to 95.3 US cents, as did the dividend ($0.2). Estimates for the current year's dividend were cut (maximum 50 cents). The group, led by new CEO Dave Lewis, is continuing its cost-cutting programme and has achieved 50 per cent of planned savings. Cut forecasts for organic net sales growth and operating profit: sales are now expected to decline between 2% and 3% organically, and operating profit, also organic, is expected to be unchanged year-on-year or at most grow below 5%.

"The main negatives are the magnitude of the cut in revenue guidance (especially in the US), the strong miss on ebit in North America, and the dividend cut, which was not widely expected by the market," Ubs analysts said in a note. Although cost savings are anticipated and cuts in A&P (advertising & promotion) expenses protect against negative operating leverage, "the higher implied investment from the dividend cut could have implications for organic ebit growth in subsequent years". Ubs has a neutral rating on the stock with a target price of EUR 1.78.