* Q1 underlying net sales growth dips 6 percent
*Maintains year operating profit growth guidance
* Shares dip 4.7 percent to 931 pence
(Adds further details, updates shares)
LONDON Oct 14 Diageo Plc (DGE.L), the world's
biggest spirits group, said on Wednesday its underlying sales
fell a sharper-than-expected 6 percent in its first quarter,
sending its shares lower, while it kept its annual profit
The British maker of Smirnoff vodka, Captain Morgan rum and
Guinness beer reported the sales decline for its July-September
first quarter, compared to analyst forecasts for an average 2.3
percent fall in sales in a Reuters poll of six brokers.
"As we anticipated consumer trends across our markets remain
broadly unchanged since the year-end. Therefore net sales in the
first quarter of the new financial year have been weak when
compared to the strong performance of the first quarter last
year," said Chief Executive Paul Walsh in a trading update.
"The year has started as we thought it would and we
reiterate our guidance for low single digit organic growth in
operating profit in fiscal 2010," Walsh added.
The London-based group cut its annual target twice in six
months earlier this year as de-stocking and downtrading to
cheaper products in the downturn hurt the drinks maker.
Walsh added that stock levels had not risen in the first
quarter and in its biggest market, North America, stocks for its
U.S. spirits business were below those seen at end-June 2009.
"This is clearly a weak figure, but is heavily driven by the
phasing of orders. Last year saw heavy buying by consumers ahead
of Christmas before the crisis hit. This year customers are
understandably being more cautious," said analyst Matthew Webb
at brokers Cazenove
He expects consumers to increase orders during key
pre-Christmas trading, assuming demand stays resilient, and
added on a positive note that the weak start was anticipated by
the company and there was no change in its full-year guidance.
Diageo shares dipped 4.7 percent to an eight-week low of
930-1/2 pence, before last trading down 3.6 percent at 941-1/2p
by 0930 GMT, making the Johnnie Walker whisky and Baileys
liqueur group worth around 24 billion pounds ($38.34 billion).
Other European spirits group shares were lower with Pernod
Ricard (PERP.PA) off 3.5 percent at 53.72 euros. It is due to
report on recent trends on Oct 22.
Analysts had warned this quarter was set to be the low point
for Diageo as the previous first-quarter of July-Sept 2008 saw
sales rise 6 percent before the market saw a fall in November
2008 as the slowdown worsened after the collapse of Lehman
In its last financial year to end-June 2009, the group saw
flat underlying sales and operating profit growth of 4 percent,
but has said it expected trading to stabilise in the last six
months of 2009 and hoped for a real recovery in 2010
The group was giving a trading update ahead of its annual
general meeting later this afternoon.
Diageo shares have underperformed the FTSE 100 .FSTE index
by 12 percent and rival Pernod Ricard (PERP.PA) by 7 percent so
far this year.
(Reporting by David Jones; editing by Rupert Winchester)