London, Feb 25, 2026, 10:15 GMT — Regular session
- Diageo shares dropped roughly 6% at the open in London, as the company trimmed its dividend and revised down its full-year forecast.
- The spirits maker pointed to sluggish U.S. demand—tequila especially lagging—and persistent headwinds in China.
- Investors want to see if the cash and debt plan is delivering, and are eyeing a strategy update expected later this year.
Shares in Diageo slid roughly 6% Wednesday, with the Guinness and Johnnie Walker parent slashing its dividend and dialing down its full-year outlook—both moves arriving in the first set of results under new CEO Dave Lewis.
Diageo’s status as a heavyweight income stock in Britain makes this move significant, as a dividend reset often shifts its shareholder base. For CEO Lewis, the timing is notable too—it’s early days, and investors want proof his turnaround plan goes beyond just talk.
The read-through spread. Some European spirits stocks slipped, with traders debating if Diageo’s U.S. slowdown signals trouble for the whole premium liquor space, or if it’s just a Diageo issue.
Diageo posted a 4% drop in reported net sales for the first half, coming in at $10.46 billion. On an organic basis, which excludes the impact of currency movements and acquisitions, net sales were down 2.8%. The company also slashed its interim dividend to 20 cents a share, compared to 40.5 cents the previous year, and introduced a new annual dividend floor of 50 cents, targeting a payout ratio between 30% and 50%. CEO Lewis pointed to weaker U.S. spirits demand, citing “a more stretched consumer wallet”. www.diageo.com
Diageo has cut its fiscal 2026 outlook, now projecting a 2%-3% drop in organic sales and operating profit that lands flat or just slightly higher. The company cited a negative “price/mix”—the combined impact from pricing shifts and changing customer purchases—largely pointing to the U.S. and China as drivers.
North America dragged results lower. Diageo reported a 9.3% drop in U.S. sales for the half, with tequila plunging over 23%—a sharp turn for what had been a top growth driver.
Management flagged higher tariff costs and a more challenging trading backdrop, but said it managed to trim marketing outlays by finding what it described as efficiencies. A&P refers to advertising and promotion; the company emphasized it’s reallocating spend, not walking away from brands.
On the balance sheet, cash and debt drew attention. Diageo reported net debt of $21.7 billion as of Dec. 31, sticking to its $3 billion free cash flow target for the year. The company is also continuing with cost-savings efforts and asset sales.
Diageo pointed to expected proceeds from its agreement to offload its interests in East African Breweries and a Kenyan spirits operation to Asahi, with the transaction targeted for completion in the back half of calendar 2026. The company also noted that United Spirits’ review regarding Royal Challengers Bengaluru’s ownership had made significant progress.
Bulls face the possibility that the U.S. slowdown drags on, pressing companies into heavier discounting and trapping margins under the weight of product mix and tariffs. China remains unpredictable too. Diageo, for its part, continues grappling with what it described as persistent softness in Chinese white spirits.
Investors now turn to the interim dividend schedule, with ex-dividend dates for the UK and U.S. set for mid-April and the payment slated for June 4. Lewis is also due to lay out his strategy update before year-end.
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