Diageo has cut its sales and operating growth expectations for the current financial year, after posting flat organic net sales growth in its first quarter.

The group, which owns drinks brands including Guinness, Captain Morgan and Smirnoff, said that its reported net sales growth declined by 2.2% year-on-year to $4.87bn, which reflected the negative impact of disposals.

Its organic net sales volume growth of 2.9% was offset by a 2.8% decline in price/mix, which was affected by adverse mix in APAC due to weaker results in China.

This result was also affected by weak consumer confidence in its US spirits division.

In response to the results, interim chief executive at Diageo, Nik Jhangiani, said the company was not impressed with its latest performance.

She said: "Net sales were flat organically in Q1, with growth in Europe, LAC and Africa offset by weakness in Chinese white spirits and a softer US consumer environment than planned for. We are not satisfied with our current performance and are focused on what we can manage and control; acting with speed to drive efficiencies, prioritising investment and adapting more quickly to an evolving consumer environment.

"We are well advanced in sharpening our strategy, and we are developing and already implementing clear plans to drive growth across the broader portfolio, ensuring that we meet relevant consumer occasions of the future. Early results from our initiatives to strengthen our commercial execution capabilities, notably in Europe, are encouraging, and we are embedding a more rigorous performance-driven culture across the business."

Despite these figures, Diageo said that its accelerate programme, which is designed to create a more agile operating model, is progressing well, with costs savings guidance of $625m remaining on track.

In its outlook, the firm has lowered its guidance for the full year, with organic net sales growth expected to be flat to slightly down year-on-year, with its operating profit growth expected to be low to mid-single digit.

Diageo also said these figures are set to be impacted by the impacts of Chinese white spirits and a weaker US consumer environment. This also includes the impact of tariffs.

Following the announcement, shares in Diageo fell by over 5%.

Investment director at AJ Bell, Russ Mould, said that shareholders have been "left drowning their sorrows again" after another disappointing set of results.

He concluded: "This latest update increases the pressure on the Diageo hierarchy to fill the leadership vacuum created by the departure of CEO Debra Crew in July and halt the sense of drift which is pervading the business. The weak outlook for 2026 reflects poor spirit sales in China and a weaker US consumer environment.

"The fear for markets will be that Diageo’s performance reflects more than just the ups and downs associated with fluctuations in the economy and instead hints at shifting drinking habits and/or the diminished appeal of Diageo’s key brands. The weak Chinese business also suggests one of Diageo’s key levers of growth – selling more to an expanding middle class in emerging markets – has broken down.

"Diageo has been struggling since the passing of the late CEO Ivan Menezes in 2023, and its travails may lead to pressure for more dramatic action to turn around the company’s fortunes, including a potential spin-off of Guinness to create a business with a distilled focus on spirits."

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