Wednesday, October 19, 2011

Diageo Sales Up 9% In First Quarter

(by Shanken News Daily) Diageo PLC posted an organic net sales increase of 9% in the three months through September, its fiscal first quarter, with all of its global operating regions showing growth of 5% or higher. Sales at the drinks giant’s North America unit were up 5% despite a 2% volume decline, as its U.S. product mix shifted to higher-priced items versus the same period last year (last year’s Q1 included the U.S. launch of accessibly-positioned Rökk vodka). Diageo said business in the wine category “remained weak” and that beer sales—where it recently unveiled a new offering, Guinness Black Lager—were roughly flat.

Meanwhile, results were solid across the rest of Diageo’s global business, with Europe rebounding to post 6% sales growth on the back of strong performances in Russia, Germany and the Nordic markets and an improvement in Spain, which at this time last year was in the midst of destocking. Latin America, boosted by a similar rebound in Venezuela, soared 30%, while Africa rose 9% (although South Africa struggled due to trading down activity). Johnnie Walker continued its standout performance in Asia Pacific, leading to a 14% sales increase for Diageo in that region, despite a slight slowdown in the Chinese economy during the period.

Diageo CEO Paul Walsh said the “fragile global economy” and a projected £35 million ($55m) negative exchange rate effect on operating profit over the course of the fiscal year pose hurdles. But he added that Diageo “continues to expect that net sales growth for the first half will improve on that delivered in fiscal 2011.” Pernod Ricard, Diageo’s closest rival across the global spirits market, unveils its first-quarter numbers tomorrow.

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