By Aimee Look

Diageo cut its full-year guidance for sales and profit growth, citing weakness in the U.S. and China, as booze makers struggle to get customers to spend on high-end drinks.

The U.K. company behind Johnnie Walker whisky, Guinness beer and Baileys Irish Cream liqueur is looking to revive growth as it continues a search for a new boss. The company in July parted ways with Debra Crew, its chief executive of two years, and has yet to name a permanent replacement.

A pullback in alcohol consumption amid changes in drinkers' habits, a challenging consumer backdrop after years of inflation and tariff uncertainty have cast a cloud on the spirits industry lately.

Diageo said Thursday that a weaker-than-planned consumer environment in the U.S. and a hit from lower sales of white spirits in China were to blame as it turned more cautious on its outlook for the year to the end of June.

Consumers are trading down in the tequila category, and competitive pressure has also increased, Diageo Interim Chief Executive Nik Jhangiani said on a conference call.

The company said it expects organic net sales growth to be flat to slightly down for the 2026 fiscal year, and organic operating profit growth in the low to mid-single digit range. It had previously forecast organic net sales growth would be similar to that in fiscal 2025, when it posted a 1.7% rise on year, with organic operating profit rising in a mid-single-digit range.

"We are not satisfied with our current performance and are focused on what we can manage and control," Jhangiani said.

Shares in Diageo were down 2.9% in European morning trading.

Diageo's guidance cut came a week after high-end liquor company Remy Cointreau lowered its outlook due to challenges in the U.S. and China. Absolut vodka and Martell cognac maker Pernod Ricard last month reported worse-than-expected sales for its most recent quarter, but reiterated its guidance.

For the quarter ended Sept. 30, the first of Diageo's fiscal year, the company posted an overall 2.2% drop in reported net sales to $4.9 billion. On an organic basis, sales were flat, with volume growth for the quarter of 2.9% offset by a 2.8% reduction from prices and the mix of products sold, it said.

Analysts had forecast quarterly net sales of $4.83 billion and an organic decline of 1.3%, according to consensus estimates compiled by the company.

Diageo's better-than-expected sales for the first quarter were probably boosted in part by frontloading of European imports ahead of the implementation of U.S. tariffs, but it seems likely that organic growth will experience a marked deterioration in the second quarter, analysts at Morgan Stanley wrote in a note to clients.

The company called out a challenging consumer environment in North America--its biggest market--that led to a 2.7% drop in organic sales. While Diageo anticipated caution among consumers, the U.S. spirits market turned out to be weaker than it planned, mainly due to the competitive pressures in the tequila segment, the Don Julio owner said.

Diageo's Asia Pacific region took a battering in the first quarter, with organic growth dropping 7.5% year-over-year mainly driven by weakness in China. Diageo attributed the decline to reduced consumption across white spirits, specifically Chinese baijiu.

Weak demand for tequila in the U.S. and baijiu in China outweighed the group's growth in Europe, Latin America and Africa and positive trends for scotch, beer and ready-to-drink cocktails, it said.

Write to Aimee Look at aimee.look@wsj.com

(END) Dow Jones Newswires

November 06, 2025 05:21 ET (10:21 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.