- Diageo shares fall to 10-year low amid falling demand in the US and China
Shares in drinks giant Diageo crashed to their lowest level in a decade –triggering warnings that one of Britain’s biggest companies is now a takeover target.
In a bleak update, the company behind brands including Guinness, Smirnoff and Johnnie Walker cut its sales and profits forecasts amid dwindling demand in China and the United States.
The FTSE 100 firm also left investors hanging over the identity of its new chief executive after the abrupt departure of Debra Crew in July.
Diageo had hoped to appoint her successor by the end of October but is still staggering on under interim boss Nik Jhangiani. Shares tumbled 6.5 per cent, or 117.5p, to 1680p – the lowest level since 2015.
The stock has fallen by a third this year and nearly 60 per cent since its peak at the end of 2021, leaving it valued at just £37.5billion. It was worth £90billion at its peak.
Analysts said the slump has left it vulnerable to predators looking to snap up its brands cheaply.
Cut forecasts: Diageo has cut its sales and profit forecasts amid dwindling demand in China and the US
Richard Hunter, head of markets at Interactive Investor, described Diageo as ‘a high-quality business which is being punished by the market’.
He added: ‘The strength and diversity of its portfolio and the share price decline very much leaves it vulnerable to an unwanted approach.’
A bid would send shockwaves through the City and fuel anxiety over the health of the UK stock market.
The London exchange is reeling from an exodus of companies through takeovers and defections to rivals.
But a successful takeover of Diageo would cause particular alarm as it would be one of the biggest in UK history.
The hunt is now on for a new management team to turn the company around and fight off any predators.
Garry White, the chief investment commentator at wealth manager Charles Stanley, said: ‘This is a company that is crying out for a good new management team with the talent to deal with the many challenges it faces.’
Under pressure: Nik Jhangiani is the interim chief executive of Diageo
The takeover speculation came as Diageo warned that sales are likely to contract in the 12 months to June 2026, having previously said they would be flat.
It also trimmed its guidance for profit growth. The downgrades followed a 2.2 per cent slide in first-quarter sales to £3.75billion.
Sales were down by 3.5 per cent in North America and fell 9.7 per cent across the Asia Pacific region, offsetting growth of around 5 per cent in Europe.
However, Guinness and Johnnie Walker scotch brands enjoyed growth, as did cocktails and ready-to-drink labels such as Smirnoff Ice.
Jhangiani said the board of directors was ‘not satisfied’ with performance.
In the US, consumer spending was weaker than it had expected, leading to a tougher market for spirits.
Pressure from rivals hit tequila lines, which saw sales slip by ‘double digits’.
And it suffered a sharp drop in sales in China, with demand also dwindling for white spirits such as baijiu.
However, Guinness and Johnnie Walker scotch brands enjoyed growth, as did cocktails and ready-to-drink labels such as Smirnoff Ice.
Russ Mould, investment director at AJ Bell, said: ‘Shareholders in Diageo have been left drowning their sorrows again as the drinks giant served up another disappointment in a year littered with them.’
Garry White, chief investment commentator at Charles Stanley, said: ‘The shares are sitting at a ten-year low after losing more than half their value since the end of 2021.
‘This is a company that is crying out for a good new management team with the talent to deal with the many challenges it faces.’
DIY INVESTING PLATFORMS
AJ Bell
AJ Bell
Easy investing and ready-made portfolios
Hargreaves Lansdown
Hargreaves Lansdown
Free fund dealing and investment ideas
interactive investor
interactive investor
Flat-fee investing from £4.99 per month
InvestEngine
InvestEngine
Account and trading fee-free ETF investing
Trading 212
Trading 212
Free share dealing and no account fee
Affiliate links: If you take out a product This is Money may earn a commission. These deals are chosen by our editorial team, as we think they are worth highlighting. This does not affect our editorial independence.
Compare the best investing account for you
#Diageo #vulnerable #takeover #bidAs #weak #sales #China #send #shares #lowest #level #decade
