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Diageo's beer and spirits biz continue to drift in opposite directions, fiscal first half results reported this morn reveal, as stock got hammered on soft results and a dividend cut. But Diageo Beer Co USA remains a big bright spot in an otherwise difficult period for world's largest distiller, which especially struggled in US spirits mkt. For 6 mos thru Dec 31, DBC USA organic net sales grew 7.3% with volume up 5.5%. And net sales were "driven by double digit growth in Guinness, led by Guinness Draught," report highlights. Still led by particularly strong on-premise gains, with brand up significantly faster all channel than in off-prem scans, where DBC continues to outpace all other top US beer suppliers. Smirnoff Ice remained rock solid too. The brand's RTDs grew mid-single-digits, "reflecting continued investment and innovations, including Smirnoff Sunny Days and Smirnoff Shorties."US Spirits Net Sales -9%, Volume -7% Organically; Tequila Took a Nose Dive But that growth was more than offset by Diageo's much bigger US spirits biz. Net sales fell 9.3% organically on 6.8% volume decline and price/mix -2.5%. That's amid "increased competitive pressure and further category softness, particularly in tequila," wrote Diageo. And indeed, co's US tequila net sales "declined 23.1%, driven by both Don Julio and Casamigos." Don Julio dropped 20.9% (lapping big growth in prior yr period) and Casamigos down 30.9%, each reflecting "weakness in the top end of the category in the US as consumers downtraded." Diageo's US spirits shipments declined about 1 pt ahead of depletions "as distributors moderated orders in response to the softer consumer environment."Global Diageo Organic Net Sales, Oper Profit Down 2.8%; Volume Off Just 0.9% Global Diageo results significantly better than in US. Reported global net sales dropped 4% to $10.5 bil for fiscal H1. Better organically with both net sales and oper profit down 2.8%. Total organic volumes fell just 0.9% on -1.9% price mix. Organic gross margin dropped 1.36% due to "adverse impacts of negative mix, cost inflation and tariffs."Guidance and Dividend Reduced; Stock Down 14% Still, co reduced its guidance for full-year fiscal 26 thru Jun 2026 and cut its dividend, sending US shares skidding ~14% at press time. New guidance calls for organic net sales down 2-3%, previously flat to down slightly, "given further weakness in the US" and China. And Diageo now expects organic oper profit to be flat to up low-singles vs prior guidance for low- to mid-single-digit growth. That includes savings from co's Accelerate program and reflects "revised net sales guidance due to the US," China and "impact of tariffs." Co still estimates ~$200 mil in unmitigated annualized tariff impact (which it expects to mitigate by around half), opting to maintain that guidance for now in wake of US Supreme Ct ruling."Significant Opportunities for Diageo to Act More Decisively," Sez "Drastic Dave" Diageo's US Spirits performance "reflected pressure on disposable income, and competitive pressure from more affordable alternatives addressing a more stretched consumer wallet," stated new ceo Sir Dave Lewis. But "Drastic Dave," as he's become known, added that "only several weeks in I can already see significant opportunities for Diageo to act more decisively to enhance its competitiveness and broaden the portfolio offering leading to higher growth." Recall, a recent FT article pointed to possibly big shakeups coming down the pike (see Friday's issue). Meanwhile, co will reduce its dividend "to a more appropriate level" for increased financial flexibility to help deliver on those opportunities, Dave commented.

DBC USA Still Up Strong on "Double Digit" Guinness Growth; Diageo US Spirits Down Big in Fiscal H1

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