Diageo sales rise as drinkers celebrate with luxury spirits

Diageo pushed up annual sales by more than a fifth as drinkers returned to bars and restaurants and celebrated with ultra-luxurious “super premium plus” spirits brands such as Don Julio tequila and Bulleit bourbon.

The distiller said drinkers were not showing signs of trading down to cheaper beverages even as earnings from retailers such as Walmart showed households were cutting back on other purchases, including clothing.

Diageo’s reported like-for-like net sales growth for the year to June 30 of 21.4 per cent. Of this, 11.1 per cent was attributed to higher prices and consumers choosing more expensive drinks categories. That brought reported net sales to £15.5bn for the year. Pre-tax profit rose 18.4 per cent to £4.4bn.

Lavanya Chandrashekar, chief financial officer, said the company was not seeing drinkers switch to cheaper brands despite economic pressure, as the group benefited from a shift towards spirits from wine and beer.

Sales of Johnnie Walker whisky were up 23 per cent, while sales of drinks in the luxurious “super-premium-plus” category, which includes the high-end Johnnie Walker Blue Label, rose 31 per cent.

“Consumers are being very discerning and willing to spend a little extra for that very special occasion,” Chandrashekar said.

However, chief executive Ivan Menezes warned that he expected the operating environment to be “challenging” in the coming year thanks to the persistent effects of the coronavirus pandemic, “significant” cost inflation and “a potential weakening of consumer spending power”.

Following the 2008 financial crisis, consumers traded down to cheaper drinks, “but only for about three or four quarters”, Chandrashekar said.

While Diageo’s sales growth during the year was partly fuelled by populations emerging from Covid-19 restrictions, the company said it had also grown since the pre-Covid era, with sales up 9 per cent since 2019.

Organic operating margin increased by 121 basis points despite the impact of cost inflation, in what Alicia Forry, analyst at Investec, said had been an “exceptional year” for the spirits maker. The reported operating margin was dented by a decision to wind down Diageo’s Russian operations following the country’s invasion of Ukraine.

Shares in the group were up 0.89 per cent in early trading to £37.99.

Source link

Related Articles

Back to top button