Highlights:

  • Q1 net sales totaled USD  4.875 billion, down 2.2% year-on-year, with organic growth flat at 0.0%.
  • Organic volume increased 2.9%, offset by a 2.8% decline in price/mix, mainly due to weakness in China’s white spirits.
  • Diageo expects around USD  3 billion in free cash flow for fiscal 26 and remains on track to achieve cost savings of USD  625 million over three years.

Diageo plc (LSE:DGE) released its trading update for the first quarter of fiscal 26, showing flat organic net sales despite a 2.9% rise in volumes. While Europe, Latin America & Caribbean (LAC), and Africa posted growth, performance was affected by softer demand in China’s white spirits market and a subdued US consumer environment. The company outlined progress on its Accelerate programme, aimed at improving operational efficiency and supporting future growth.

Mixed Regional Performance

Diageo’s reported net sales for the quarter ending 30 September 2025 declined by 2.2% to USD  4.875 billion, reflecting the impact of recent disposals and minor currency effects. Organic net sales were flat, with a 2.9% rise in volume counterbalanced by a 2.8% negative price/mix impact, largely stemming from weaker results in China’s white spirits category. Excluding China, price/mix performance was broadly stable.

Europe, LAC, and Africa experienced positive organic sales growth, helping offset declines in North America and Asia Pacific. In the US, spirits sales were affected by lower consumer confidence and reduced demand compared to the previous year, including tough comparatives from tequila restocking in fiscal 25. In Asia Pacific, the Chinese white spirits market contributed a roughly 2.5% drag on group net sales.

Accelerate Programme and Operational Initiatives

Diageo reported continued progress on its Accelerate programme, designed to improve operational agility and optimise investment. Cost savings of approximately USD  625 million are expected over the next three years. During Q1, the company leveraged existing analytics tools, artificial intelligence, and process simplifications to refine advertising and promotion (A&P) spend, streamline operations, and enhance commercial execution. Early results from Europe have been encouraging, with Diageo emphasizing a performance-driven culture to adapt to evolving consumer habits.

Fiscal 26 Outlook

The company has updated guidance for fiscal 26, reflecting weaker-than-anticipated performance in the US and China. Organic net sales are expected to remain flat or slightly down, with low-to-mid single-digit growth anticipated in organic operating profit, supported by cost savings. Capital expenditure is forecast at the lower end of USD  1.2–1.3 billion, while free cash flow is projected at around USD  3 billion. Diageo aims to remain within a target leverage range of 2.5–3.0x net debt to adjusted EBITDA by fiscal 28, aided by selective disposals and disciplined capital allocation.

Tariffs on imports into the US are expected to cost approximately USD  200 million annually pre-mitigation, though about half of this impact is projected to be offset on operating profit.

Looking Ahead

Diageo highlighted continued momentum in its scotch portfolio, including Johnnie Walker, as well as growth in ready-to-drink (RTD) and ready-to-serve (RTS) beverages, particularly Smirnoff Ice and branded cocktails. These gains partly offset declines in Chinese white spirits and North American tequila sales. Management stressed ongoing focus on controlling key operational levers, prioritizing investment, and adapting to changing consumer trends to drive performance in the remainder of fiscal 26.

DGE shares were trading at GBX 1,746.00 per share during trading hours on 6 November 2025.