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Diageo(DEO) - 2025 H2 - Earnings Call Transcript
DiageoDiageo(US:DEO)2025-08-05 09:32

Financial Data and Key Metrics Changes - The company is planning for a more cautious consumer environment in the US for fiscal 2026, indicating a focus on managing inventory levels and achieving normalized stock levels [10][11] - Organic sales guidance for fiscal 2026 is expected to be similar to fiscal 2025, with a potential acceleration in the second half of the year [15][16] - The company anticipates a $50 million reduction in starting EBIT due to disposals, with additional impacts from the sale of Ghana and Seychelles breweries [21][22] Business Line Data and Key Metrics Changes - The spirits segment in Europe has faced pressure, but the company views this as an opportunity to better control outcomes by focusing on local markets and consumer dynamics [11][12] - The company is focusing on driving growth in key brands such as Don Julio and Guinness, despite organic sales declines [19][20] Market Data and Key Metrics Changes - The US market is expected to be cautious, with a stretched consumer wallet impacting sales [28][29] - The company is optimistic about the potential for growth in the Asia Pacific region, particularly in China, despite recent challenges [30][31] Company Strategy and Development Direction - The company is reorganizing to capture growth opportunities by being more locally focused and occasion-led in various markets [12][13] - There is a clear strategy to enhance commercial execution at the point of sale, with a focus on training and upskilling resources [17][18] - The company is committed to premiumization and expanding its portfolio, particularly in the tequila segment [40][41] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the current macroeconomic pressures but believes that moderation trends in consumer behavior present new opportunities [65][66] - The company remains confident in the long-term growth potential of the US spirits market despite short-term pressures [79][80] Other Important Information - The company is implementing changes to its currency hedging strategy to reduce volatility and align hedge targets with operating profit exposure [36][37] - The company plans to reinvest 50% of cost savings into better commercial execution and digitization efforts [70][71] Q&A Session Summary Question: US depletion outlook and inventory message - Management indicated that inventory levels have normalized and they are planning for a cautious consumer environment in the US for fiscal 2026 [10][11] Question: Investment in Europe and spirits portfolio - Management acknowledged the pressure on the spirits portfolio in Europe but sees it as an opportunity for better control and growth [11][12] Question: Organic sales guidance for fiscal 2026 - Management expects organic sales guidance for fiscal 2026 to be similar to fiscal 2025, with potential acceleration in the second half [15][16] Question: Impact of disposals on EBIT - Management confirmed a $50 million reduction in starting EBIT due to disposals, with additional impacts from recent sales [21][22] Question: Focus on moderation trends - Management noted that moderation trends are here to stay and the company is looking to tap into this with a broader range of products [65][66] Question: Reinvestment of cost savings - Management stated that 50% of cost savings will be reinvested into commercial execution and digitization efforts [70][71]