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Diageo Withdraws Guidance, Citing “Significant Impact” From Covid-19

April 9, 2020

The world’s largest spirits marketer addressed global business conditions amid the Covid-19 crisis this morning, warning that it’s seeing “a significant impact” on its performance due to widespread containment measures implemented in March.

With the crisis disrupting on-trade markets around the world, Diageo withdrew its guidance for its fiscal year ending in June, saying it’s “not in a position to accurately assess the impact of this on our future financial performance.” In late February, the company said it was expecting negative impacts on net sales and operating profit in its fiscal year ending in June to be in the range of £225 million-£325 million ($291m-$420m) and £140 million-£200 million ($181m-$259m), respectively.

Across its business, Diageo says it’s tracking changes in consumer behavior due to the on-trade closures, including in the U.S., where the on-premise accounts for about 20% of its net sales for spirits. According to new WSWA data, depletions in U.S. on-premise accounts were down close to 50% in March for both wine and spirits, compared with rolling 12-month trends through February that were flat for wine and up almost 5% for spirits. Off-premise depletions increased 25% in March for both categories, however. The situation is similar in Europe, where the on-trade accounts for half of Diageo’s net spirits sales. “In both of these regions, we have seen some pick-up in the off-trade channel in recent weeks, although it is unclear whether this will be sustained,” the company said.

Elsewhere, Diageo notes that it’s seeing “a very slow return of off-trade consumption” in China, where bars and restaurants are gradually reopening. More severe disruptions are occurring in India—where both the on- and off-trade as well as production has been shut down through at least April 14—and travel retail, which has seen “a steep drop in passenger numbers, as well as new travel restrictions imposed by many countries.”

Amid the turbulent market conditions, late last month Diageo announced some key executive changes within its business, including the appointment of board member Debra Crew as president of Diageo North America effective July 1, replacing the retiring Deirdre Mahlan. The drinks giant also named a new global CMO, company veteran Cristina Diezhandino. She replaces Syl Saller, who is also retiring from the company July 1.—Daniel Marsteller

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