Diageo share price tumbles as group warns on sales growth

Shares in Diageo (LONN:DGE) have fallen deep into the red in London this morning, as the maker of Johnnie Walker whiskey and Smirnoff warned its first-half sales growth to suffer from the timing of Chinese New Year and a ban on selling alcohol near Indian highways. The update comes after the FTSE 100 group recently inked a deal to acquire George Clooney’s Casamigos business.

As of 09:58 BST, Diageo’s share price had given up 2.18 percent to 2,441.50p, underperforming the broader UK market, with the benchmark FTSE 100 index currently standing 0.01 percent lower at 7,274.48 points. The group’s shares have added nearly 12 percent to their value over the past year, and are up by some 15 percent in the year-to-date.

Diageo announced in a statement this morning it expects its organic net sales growth rate in the first half of its financial year to be impacted by the later timing of Chinese New Year, as well as by the expected impact of the highway ban in India. Reuters noted in its coverage of the news that India’s top court had banned liquor outlets within 500 metres of national and state highways in April.

“Given that both of these were known about at the time of the full-year results back in July we wonder why it wasn’t pointed out then,” RBC Capital Markets wrote in a note, as quoted by the newswire.

The FTSE 100 group, however, assured investors that it continued to expect mid-single digit top line growth and 175bps of organic operating margin improvement over the three years ending 30 June 2019. Diageo further noted in the statement that its expectations on overall performance for the year remained unchanged.

As of 10:14 BST, Wednesday, 20 September, Diageo plc share price is 2,439.50p.