Diageo sales to be affected by US tariffs war

Diageo has cut their sales target as the US President has caused uncertainty over the US tariffs war.

The Guinness maker said they are in talks with the US government to work out any incoming tariffs that could impact their sales.

Norther America contributed to 38% of their sales in the first half of their financial year and Canada and Mexico saw 45% of Diageo’s products.

Diageo said they are expecting Canadian whisky and tequila brands to be affected by the tariffs.

In the six months to 31 December the company said that net sales fell by 0.6% to $10.9 billion and organic sales was hit by “unfavourable” currency exchange rates.

In the US tequila sales rose by 23% and in the UK the group’s sales grew 2% in the half year due to strong demand for Guinness.

In the second half of the year Diageo expect a growth in sales and the company announced that shares dropped 3% to 2286p.

Debra Crew, chief executive of Diageo, said, “Our fiscal 2025 first-half results marked a return to growth, delivering organic net sales growth of 1% despite a challenging industry backdrop as consumers continue to navigate through inflationary pressures.

“The confirmation at the weekend of the implementation of tariffs in the US, whilst anticipated, could very well impact this building momentum.

“We are taking a number of actions to mitigate the impact and disruption to our business that tariffs may cause, and we will also continue to engage with the US administration on the broader impact that this will have on everyone supporting the US hospitality industry, including consumers, employees, distributors, restaurants, bars and other retail outlets.”

Hargreaves Lansdown analyst Derren Nathan said, “For now, tariff headlines will set the mood – but if the trade war ends in more posturing than penalties, Diageo’s world-class brands and global reach could make the current valuation an attractive entry point.”

Richard Hunter, Head of Markets here at interactive investor said, “The scale of the challenges ahead is reflected in a share price which has fallen by 20% over the last year, as compared to a gain of 12.7% for the wider FTSE 100, and by 34% over the last two years.

“It therefore follows that until such time as an improvement in customer demand becomes evident and the true impacts of any tariffs can be dealt with, the market consensus of the shares as a hold is likely to remain in place.”