By Andrea Figueras

Diageo raised its cost-savings target and forecast sales growth to remain stable as the U.K. spirits giant seeks to navigate trade disputes and a slowdown in alcohol consumption.

In its first set of earnings since the owner of brands such as Guinness beer and Johnnie Walker whisky replaced its chief executive last month, the company said it is sharpening its strategy to drive faster sales growth.

"While we are encouraged by areas of progress and the standout performance from Don Julio, Guinness and Crown Royal Blackberry, there is clearly much more to do across our broader portfolio and brands," Diageo's interim chief executive, Nik Jhangiani, said Tuesday.

The company increased by around $125 million a cost-savings target under a restructuring program it unveiled earlier this year, to a total of roughly $625 million over the next three years.

While there will be some job cuts, this isn't the main objective of the program, Jhangiani said during a call with reporters. Jhangiani, who joined the group as finance chief last year, took up the top role at Diageo on an interim basis after the company parted ways with Debra Crew.

Shares in Diageo climbed 6.4% in European morning trading, but remained down nearly 24% since the start of the year.

Liquor makers have been dealing with a tough market lately as some drinkers shun alcoholic beverages after a pandemic-era spike in sales, and President Trump's tariffs threaten to compound the sector's challenges. Diageo withdrew its medium-term objectives in February, citing uncertainty in key markets that hindered the pace of its recovery.

Diageo reported net sales of $20.245 billion for the year to June, 0.1% lower than in the prior year. In organic terms, net sales grew 1.7%.

The result compares with analysts' prospects of $20.2 billion and organic growth of 1.4%, according to consensus estimates provided by the company.

For fiscal 2026, the company anticipates organic sales growth at a similar level to fiscal 2025 given a continued challenging market. Organic operating profit growth is expected to be in mid-single-digit, helped by cost reductions.

Diageo said its guidance includes an impact from current tariffs. The company expects actions it has taken to date--including inventory changes, supply-chain shifts and reallocation of investments--will reduce the tariff hit to its annual operating profit to around half of the $200 million it previously estimated, before any changes to prices.

Decisions regarding any potential price increases will be based on the consumer environment and don't necessarily always come back to brands where the tariffs are coming in, Jhangiani said.

The company has plans for a more cautious consumer environment in North America as shoppers have more pressure on their wallets, he said. The group will look at pricing in other markets too, Jhangiani added.

Diageo said it made a full-year net profit of $2.35 billion, down from $3.87 billion a year before, while its pretax profit fell to $3.54 billion from $5.46 billion. Excluding exceptional items, its operating profit was down 0.7% organically at $5.7 billion.

The company proposed a final dividend for fiscal 2025 of 62.98 cents a share, flat on year.

Write to Andrea Figueras at andrea.figueras@wsj.com

(END) Dow Jones Newswires

August 05, 2025 05:22 ET (09:22 GMT)

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