Diageo plc reported first‑half 2026 results, showing net sales fell 4.0% to $10.46 billion, a 2.8% drop in organic sales. The decline reflects weaker demand in North America and China, where the company faced pressure from lower disposable income and intensified competition, especially in the tequila category.
Adjusted earnings per share rose to 95.3 cents, beating the consensus of 93.5 cents by 1.8 cents. The beat was driven by disciplined cost management and the Accelerate program, which delivered about 40 % of its FY26 savings in the first half, offsetting margin pressure from adverse market mix and tariff costs.
The company lowered its fiscal 2026 guidance, now expecting organic net sales to decline 2‑3 % versus the prior flat‑to‑slightly‑down outlook, and projecting organic operating profit growth to be flat to low‑single‑digit. The revision signals management’s concern about near‑term demand in the U.S. and China and a shift toward strengthening the balance sheet.
To support the new guidance and preserve financial flexibility, Diageo cut its interim dividend in half, from 40.5 cents to 20 cents per share. CEO Sir Dave Lewis said the board had “taken the difficult decision to reduce the dividend to a more appropriate level which will accelerate the strengthening of our balance sheet,” emphasizing the need for capital allocation flexibility as the company pursues strategic opportunities.
Segment analysis shows that while Europe, Latin America, and Africa delivered growth, North America and China underperformed, with tequila volumes in the U.S. declining and Chinese white‑spirits sales pressured by competition. The company’s Accelerate cost‑saving program and planned divestiture of its East African Breweries stake are expected to reduce net debt and improve operating leverage.
Market reaction was negative, with shares falling up to 16 % in early trading. Investors focused on the lowered full‑year guidance and the dividend cut, both tied to persistent headwinds in the U.S. and China, and weighed the company’s ability to rebound in the near term.
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