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Diageo FY25 Earnings & Sales Fall Y/Y on Soft Volume, FY26 View Bleak
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Key Takeaways
DEO's FY25 EPS fell 8.6% y/y due to lower Moet Hennessy contribution and adverse currency impacts.
Net sales dipped 0.1% as gains in organic sales were offset by divestitures and currency headwinds.
DEO expects FY26 organic sales to be flat, with H2-weighted profit growth driven by cost savings.
Diageo plc (DEO - Free Report) reported preliminary fiscal 2025 results, ending June 30, 2025, wherein pre-exceptional earnings per share declined 8.6% year over year to 164.2 cents. This was mainly due to a significantly lower contribution from Moët Hennessy and adverse currency effects.
On a reported basis, net sales slipped 0.1% year over year to $20.2 billion. The decline was due to unfavorable currency impacts and acquisition and disposal adjustments, offset by improved organic sales. The negative impacts of acquisitions and disposals primarily reflected the Guinness Nigeria divestiture and the Cîroc brand transition in North America.
Organic net sales rose 1.7% year over year, aided by organic volume growth of 0.9% and improved price/mix of 0.8%. Excluding the Cîroc transaction impacts in North America, organic net sales were up 1.5%, with 0.8% volume growth and a 0.7% price/mix.
The contribution to growth from volume and price/mix was relatively balanced. Three of the company’s five regions delivered volume growth, while four recorded a positive price/mix.
Volume declined in North America and Europe, reflecting a continued cautious consumer environment amid macroeconomic uncertainty and inflationary pressure. However, this was more than offset by volume gains in the Asia Pacific, led by India, and in Africa and Latin America (LAC).
In terms of price/mix, North America saw positive contributions, driven by tequila, particularly aged variants, with Don Julio showing notable strength. In Europe, Guinness remained the key growth driver. LAC delivered a continued positive price/mix as the region rebounded from prior consumer downtrading and intense competitive pressures, with additional benefit from favorable year-over-year comparisons. In the Asia Pacific, the price/mix declined due to consumer downtrading in Southeast Asia and China, compounded by an unfavorable market mix.
Shares of the Zacks Rank #2 (Buy) company have lost 16.7% in the past year compared with the industry’s 15.6% decline.
Image Source: Zacks Investment Research
The company’s reported operating profit declined 27.8% year over year to $4.3 billion in fiscal 2025 due to exceptional impairment and restructuring charges, unfavorable currency movements, and a contraction in organic operating margin. Organic operating profit fell 0.7% year over year, reflecting continued investment in overheads, partially offset by modest gross margin expansion.
The reported operating margin contracted 819 bps year over year, while the organic operating margin contracted 68 bps. Excluding the impacts of the Cîroc transaction, organic operating profit declined 1%, consistent with prior guidance, while the organic operating margin contracted by 70 bps.
DEO’s Other Financials
In fiscal 2025, Diageo delivered net cash from operating activities of $4.3 billion, marking a year-over-year increase of $0.2 billion. DEO reported a strong free cash flow of $2.7 billion, up $0.1 billion from the prior year due to strong working capital management. This was offset by lower operating profit and higher interest expenses.
Diageo is committed to its disciplined approach to capital allocation to enhance its shareholder value. In fiscal 2025, the company incurred a capital expenditure of $1.5 billion related to investments in the business for long-term sustainable growth.
The company expects capital expenditures to trend lower in the next three years, stabilizing at mid-single digits as a percentage of net sales.
DEO’s FY26 Outlook
Diageo expects the operating environment to remain challenging in fiscal 2026, with many of the headwinds observed in fiscal 2025 likely to persist. The company anticipates organic net sales for fiscal 2026 to be broadly in line with fiscal 2025, reflecting ongoing macroeconomic pressures. Growth is expected to be weighted toward the second-half of fiscal 2026, with a slight decline in organic net sales projected for the first half.
For fiscal 2026, Diageo forecasts mid-single-digit growth in organic operating profit, also skewed toward the second half. This improvement will be primarily driven by cost savings under its Accelerate Program, partially offset by the continued impacts of tariffs.
The company expects a pre-exceptional tax rate of 25% for fiscal 2026, up slightly from 24.9% in fiscal 2025. The effective interest rate is projected at 4%, a marginal decline from 4.1% in the prior year. Capital expenditure is estimated between $1.2 billion and $1.3 billion, while the free cash flow is expected to be $3 billion, underpinned by disciplined cost management and operational efficiencies.
Other Stocks to Consider
We highlighted some other top-ranked stocks from the broader Consumer Staples space, namely PepsiCo Inc. (PEP - Free Report) , Celsius (CELH - Free Report) and Carlsberg (CABGY - Free Report) .
PEP delivered a trailing four-quarter earnings surprise of 1%, on average. The Zacks Consensus Estimate for PepsiCo’s current financial-year sales indicates growth of 1.3% from the year-ago reported number, while the EPS estimate indicates a year-over-year decline of 1.8%.
Celsius specializes in commercializing healthier, nutritional functional foods, beverages and dietary supplements. CELH currently carries a Zacks Rank #2.
The Zacks Consensus Estimate for Celsius’ current financial-year sales and EPS indicates growth of 62.2% and 18.6%, respectively, from the year-ago reported numbers. CELH delivered a trailing four-quarter negative earnings surprise of 15.3%, on average.
Carlsberg is a brewing company and has operations in Northern and Western Europe, Eastern Europe, and Asia. CABGY has a Zacks Rank of 2 at present.
The Zacks Consensus Estimate for CABGY’s current financial-year sales and EPS implies growth of 31.8% and 11.3%, respectively, from the year-ago reported numbers.
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Diageo FY25 Earnings & Sales Fall Y/Y on Soft Volume, FY26 View Bleak
Key Takeaways
Diageo plc (DEO - Free Report) reported preliminary fiscal 2025 results, ending June 30, 2025, wherein pre-exceptional earnings per share declined 8.6% year over year to 164.2 cents. This was mainly due to a significantly lower contribution from Moët Hennessy and adverse currency effects.
On a reported basis, net sales slipped 0.1% year over year to $20.2 billion. The decline was due to unfavorable currency impacts and acquisition and disposal adjustments, offset by improved organic sales. The negative impacts of acquisitions and disposals primarily reflected the Guinness Nigeria divestiture and the Cîroc brand transition in North America.
Organic net sales rose 1.7% year over year, aided by organic volume growth of 0.9% and improved price/mix of 0.8%. Excluding the Cîroc transaction impacts in North America, organic net sales were up 1.5%, with 0.8% volume growth and a 0.7% price/mix.
Diageo plc Price and Consensus
Diageo plc price-consensus-chart | Diageo plc Quote
The contribution to growth from volume and price/mix was relatively balanced. Three of the company’s five regions delivered volume growth, while four recorded a positive price/mix.
Volume declined in North America and Europe, reflecting a continued cautious consumer environment amid macroeconomic uncertainty and inflationary pressure. However, this was more than offset by volume gains in the Asia Pacific, led by India, and in Africa and Latin America (LAC).
In terms of price/mix, North America saw positive contributions, driven by tequila, particularly aged variants, with Don Julio showing notable strength. In Europe, Guinness remained the key growth driver. LAC delivered a continued positive price/mix as the region rebounded from prior consumer downtrading and intense competitive pressures, with additional benefit from favorable year-over-year comparisons. In the Asia Pacific, the price/mix declined due to consumer downtrading in Southeast Asia and China, compounded by an unfavorable market mix.
Shares of the Zacks Rank #2 (Buy) company have lost 16.7% in the past year compared with the industry’s 15.6% decline.
Image Source: Zacks Investment Research
The company’s reported operating profit declined 27.8% year over year to $4.3 billion in fiscal 2025 due to exceptional impairment and restructuring charges, unfavorable currency movements, and a contraction in organic operating margin. Organic operating profit fell 0.7% year over year, reflecting continued investment in overheads, partially offset by modest gross margin expansion.
The reported operating margin contracted 819 bps year over year, while the organic operating margin contracted 68 bps. Excluding the impacts of the Cîroc transaction, organic operating profit declined 1%, consistent with prior guidance, while the organic operating margin contracted by 70 bps.
DEO’s Other Financials
In fiscal 2025, Diageo delivered net cash from operating activities of $4.3 billion, marking a year-over-year increase of $0.2 billion. DEO reported a strong free cash flow of $2.7 billion, up $0.1 billion from the prior year due to strong working capital management. This was offset by lower operating profit and higher interest expenses.
Diageo is committed to its disciplined approach to capital allocation to enhance its shareholder value. In fiscal 2025, the company incurred a capital expenditure of $1.5 billion related to investments in the business for long-term sustainable growth.
The company expects capital expenditures to trend lower in the next three years, stabilizing at mid-single digits as a percentage of net sales.
DEO’s FY26 Outlook
Diageo expects the operating environment to remain challenging in fiscal 2026, with many of the headwinds observed in fiscal 2025 likely to persist. The company anticipates organic net sales for fiscal 2026 to be broadly in line with fiscal 2025, reflecting ongoing macroeconomic pressures. Growth is expected to be weighted toward the second-half of fiscal 2026, with a slight decline in organic net sales projected for the first half.
For fiscal 2026, Diageo forecasts mid-single-digit growth in organic operating profit, also skewed toward the second half. This improvement will be primarily driven by cost savings under its Accelerate Program, partially offset by the continued impacts of tariffs.
The company expects a pre-exceptional tax rate of 25% for fiscal 2026, up slightly from 24.9% in fiscal 2025. The effective interest rate is projected at 4%, a marginal decline from 4.1% in the prior year. Capital expenditure is estimated between $1.2 billion and $1.3 billion, while the free cash flow is expected to be $3 billion, underpinned by disciplined cost management and operational efficiencies.
Other Stocks to Consider
We highlighted some other top-ranked stocks from the broader Consumer Staples space, namely PepsiCo Inc. (PEP - Free Report) , Celsius (CELH - Free Report) and Carlsberg (CABGY - Free Report) .
PepsiCo is one of the leading global food and beverage companies. It currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
PEP delivered a trailing four-quarter earnings surprise of 1%, on average. The Zacks Consensus Estimate for PepsiCo’s current financial-year sales indicates growth of 1.3% from the year-ago reported number, while the EPS estimate indicates a year-over-year decline of 1.8%.
Celsius specializes in commercializing healthier, nutritional functional foods, beverages and dietary supplements. CELH currently carries a Zacks Rank #2.
The Zacks Consensus Estimate for Celsius’ current financial-year sales and EPS indicates growth of 62.2% and 18.6%, respectively, from the year-ago reported numbers. CELH delivered a trailing four-quarter negative earnings surprise of 15.3%, on average.
Carlsberg is a brewing company and has operations in Northern and Western Europe, Eastern Europe, and Asia. CABGY has a Zacks Rank of 2 at present.
The Zacks Consensus Estimate for CABGY’s current financial-year sales and EPS implies growth of 31.8% and 11.3%, respectively, from the year-ago reported numbers.