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Diageo has launched a $500mn cost-cutting programme to lower its debt burden as the spirits giant reported a sales boost driven by US distributors stockpiling in anticipation of President Donald Trump’s tariffs.
The Johnnie Walker and Guinness maker has come under pressure from investors to lower its costs and reduce its leverage, as sluggish demand hit alcohol sales and wider concerns around falling alcohol consumption weighed on the company’s share price.
Diageo’s net sales rose 2.9 per cent to $4.4bn in the first three months of the year, while US sales rose 5.9 per cent as retailers stocked up on imported spirits.
In February, Diageo scrapped its target of 5 to 7 per cent medium-term sales growth, blaming uncertainty over US tariffs and weak demand in key markets.
On Monday, the company lowered the estimated impact of tariffs on its operating profits to $150mn a year. It had previously forecast a $200mn hit. Diageo said it expected to be able to mitigate half of the $150mn figure but did not specify how it would do this.
The FTSE 100 company said its cost cutting would deliver about $3bn in free cash flow each year from 2026 and get back to its leverage target by 2028.
The spirits company has faced calls to reduce its debts. At the end of 2024 its leverage was at the top end of its target ratio of 2.5 to 3 times net debt to earnings before interest, tax, depreciation and amortisation.
