LONDON (Reuters) - Alcoholic drinks maker Diageo forecast flat sales for the first half of its financial year in the United States, its biggest and most profitable market, after demand over Thanksgiving fell short of its hopes.
Shares in the world’s largest spirits company, home to Johnny Walker whisky and Smirnoff vodka, were down nearly 2 percent at 1,792 pence on Wednesday, after falling as much as 3.9 percent on remarks by its North American chief, Larry Schwartz.
“Thanksgiving sales were OK but not as strong as we would have hoped,” Schwartz told investors on a conference call.
Even though “the next 17 days will really tell the story,” Schwartz said he expected the region’s sales to be “broadly flat” in the six months through December compared with the year-earlier period.
With Thanksgiving, Christmas and New Year’s Eve, the November-December period is critical for sellers of wine and spirits.
Regarding profits, Schwartz said North America would not deliver “anywhere near as much margin improvement” as it has over the past two years, when margins increased by 300 basis points.
Part of the reason for the weaker performance is that Diageo is more heavily discounting Smirnoff vodka in the United States as it aims to stem drinkers’ migration to cheaper brands or other drinks.
In addition, the entire spirits category has slowed, Schwartz said, as the economic recovery remains uneven. The overall spirits market is now growing at about 3 to 3.5 percent, he said, which represents a slowing of as much of one percentage point.
In order to stand out better on an increasingly crowded bar shelf, Diageo has revamped Smirnoff‘s’ packaging and marketing, and is launching new products such as Smirnoff sours.
Reporting by Martinne Geller; Editing by David Holmes and Mark Potter