Diageo Share Price Moves Higher: Company Guides For Organic Growth In FY26

Diageo's share price (LON:DGE) is moving higher today, up 4.4% following the release of its preliminary results for the year end. Despite a challenging market environment, the world's largest spirits producer is undertaking significant strategic measures to bolster future growth and efficiency, and markets are reacting well to the print.

The company reported a marginal 0.1% decline in net sales to $20.2 billion, primarily impacted by a 0.6% headwind from unfavourable foreign exchange rates and a 1.1% adjustment related to acquisitions and disposals. In the context of recent stock performance, with Diageo's shares down 28.75% YTD leading into today's update, the decline may look better than expected.

Organic net sales growth also came in positive at 1.7%, driven by a balanced contribution from volume (0.9%) and price/mix (0.8%).

Excluding the impact of the Cîroc transaction, organic net sales grew 1.5%, with volume up 0.8% and price/mix contributing 0.7%, with the company growing or maintaining market share in 65% of measured markets.

Organic operating profit declined by 0.7%, and the organic operating profit margin contracted by 68 basis points, primarily due to continued investment in overheads.

Interim Chief Executive Nik Jhangiani acknowledged the mixed performance. “While we are encouraged by areas of progress and the standout performance from Don Julio, Guinness and Crown Royal Blackberry, there is clearly much more to do across our broader portfolio and brands,” he stated, reinforcing the need for decisive action.

Strategic Overhaul and Future Outlook

In response to these challenges, Diageo is aggressively pursuing cost-saving initiatives and strategic restructuring. The company has increased its savings target under the “Accelerate” program to approximately $625 million, up from $500 million, aiming to drive productivity, cash generation, and growth.

Furthermore, Diageo is considering significant asset disposals, including East African Breweries Limited, its Chinese baijiu business, and potentially underperforming brands like Captain Morgan, to streamline operations and focus on core growth drivers.

Diageo estimates an unmitigated annual impact of approximately $150 million on operating profit from tariffs and is implementing mitigation strategies, including pricing adjustments and supply chain optimization, whilst engaging with the U.S. administration to advocate for a resolution.

Looking ahead to fiscal 2026, Diageo anticipates organic sales growth to be similar to fiscal 2025, with mid-single-digit organic operating profit growth. Capital expenditure is projected to decline to between $1.2 billion and $1.3 billion, and free cash flow is expected to be around $3 billion, including exceptional cash costs related to the Accelerate program.