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UPDATE 2-Diageo sales top forecast as drinkers go upmarket

UPDATE 2-Diageo sales top forecast as drinkers go upmarket

Reuters · 07/28/2022 02:15
UPDATE 2-Diageo sales top forecast as drinkers go upmarket

Full-year sales up 21.4% vs forecast 16.1% rise

High-end brands contributed 57% of reported sales

Price increases more than offset inflation pressures

Adds details, shares

By Richa Naidu

- Johnnie Walker whisky maker Diageo DEO beat annual sales forecasts on Thursday as more people drank expensive spirits and bars reopened after pandemic lockdowns the previous year.

The world's largest spirits maker, which also makes Tanqueray gin, Captain Morgan's rum and Ketel One vodka, said sales jumped 21.4% to 15.5 billion pounds ($18.9 billion) in the year to June 30, beating analyst forecasts for a 16.1% rise.

Diageo has benefited since the start of the pandemic from drinkers trading up to more expensive types of alcohol, investing along the way in its premium brands such as Bulleit Bourbon and Don Julio tequila.

"Consumers are choosing to drink better, and that's leading to the premiumization of the category," Diageo's head of finance, Lavanya Chandrashekar, said.

The company said its high-end brands contributed 57% of reported sales.

Its shares were up 0.9% in early trading.

For the financial year, though, Diageo sounded a of caution.

"Looking ahead to fiscal '23, we expect the operating environment to be challenging, with ongoing volatility related to COVID-19, significant cost inflation, a potential weakening of consumer spending power and global geopolitical and macroeconomic uncertainty," Chief Executive Ivan Menezes said.

Diageo said it was able to raise prices to "more than offset" its cost inflation of roughly 7-8% since the start of the Russia's invasion of Ukraine. That cost inflation is expected to abate this financial year, Diageo said.

($1 = 0.8213 pounds)

(Reporting by Richa Naidu
Editing by David Goodman and Mark Potter)

((richa.@tr.com; Follow me on Twitter https://twitter.com/Richa_Writes; +44 755 755 9587;))