Diageo Reports $4.931 Billion in First-Quarter Sales as Organic Growth Remains Limited
Key Facts
Diageo reported net sales of $4.931 billion in the first quarter of fiscal 2027, up 1.2% from $4.875 billion in the year-earlier period. The company said the period ended on September 30, 2026, and that its quarterly figures were unaudited. Organic sales growth was 1.4%, but fell to 0.6% excluding the contribution from EABL. The results came as the company kept its fiscal-year outlook unchanged amid continued market weakness in North America. Chief Executive Dave Lewis said the quarter's results were "a small step in the right direction."
The components of organic growth show that higher sales did not come from broader volumes outside EABL: volume fell 0.1%, while price mix rose 0.7%. Diageo attributed its positive organic growth in part to offsetting the effects of unfavorable foreign-exchange movements and asset disposals. EABL added double-digit growth and contributed 0.8 percentage points to the group's organic sales growth. Excluding it means growth across the rest of the group was much slower than the overall organic figure. These numbers frame the quarter as a limited improvement in sales, with volume remaining weak outside the subsidiary's contribution.
Performance varied by region: Latin America and the Caribbean and Asia Pacific delivered mid-single-digit growth, while India and the Europe, Middle East and Africa region posted low-single-digit growth. By contrast, organic sales in North America fell at a mid-single-digit rate as market weakness continued. The company said whiskey, Guinness and Smirnoff ready-to-drink beverages grew at the category level. North American sales fell 3.6%, Reuters reported, a smaller decline than the 6.7% analysts had expected. The company pointed to growth in Guinness, while tequila and Crown Royal whiskey sales continued to post double-digit declines.
Diageo kept its fiscal 2027 outlook for organic sales growth at around flat and organic operating profit growth in the low- to mid-single-digit range. The company expects organic sales in North America to fall at a mid-single-digit rate, assuming the market contracts by about 3%. It also expects free cash flow of about 2 billion dollars after exceptional costs of about 850 million dollars related to operating model changes and a supply-chain savings program, excluding cash from EABL. The company said its fiscal-year operating profit outlook includes about 40% of the savings from operating model changes, totaling about 850 million dollars, and about 25% of supply-chain savings, totaling about 150 million dollars. These estimates show that some of the announced savings will be realized in the current fiscal year, while the program will be implemented over a longer period.
At its capital markets day in August, Diageo announced total savings of about 1 billion dollars over three years, split between about 850 million dollars from operating model changes and 150 million dollars from supply-chain initiatives. This follows fiscal 2026, when organic sales fell 2%, volume declined 0.4% and price mix deteriorated 1.6%, while reported sales fell 3% to 19.6 billion dollars. Reported operating profit also fell 27.2% that year, and its margin declined 535 basis points amid restructuring costs and impairment charges. Restructuring costs totaled 0.9 billion dollars in fiscal 2026, including about 752 million dollars to implement the new operating model. The company said the model would deliver savings of about 850 million dollars over two years beginning in fiscal 2027.
Lewis said the company was operating in a difficult market facing geopolitical volatility, and that the ongoing conflict in the Middle East was affecting energy, supply and distribution. In trading on November 5, the stock rose 2.65% at 11:24 GMT after organic sales growth came in at 0.6%, compared with analysts' expectations for a 0.4% decline. The stock closed at $100.25 that day. Reuters reported that pricing and pack-size initiatives Lewis is counting on to restore growth may take at least nine months to begin showing an impact. The company's outlook for the current fiscal year, particularly North American weakness and restructuring costs, remains a focus as investors track execution of its transformation plan.