Diageo posts surprise sales rise as North America decline slows

Diageo posted an unexpected rise in first-quarter organic ‌net sales after a slower-than-expected decline in top market North America, with CEO Dave Lewis calling the results a step in the right direction for the world's largest spirits maker.

Lewis, nicknamed "Drastic Dave" for his cost-cutting measures at ‌Tesco and Unilever, joined Diageo in January and has moved to overhaul the company and revive ‌growth after years of weak demand. Diageo, maker of Johnnie Walker whisky and Guinness beer, posted organic net sales growth of 0.6% for the three months ended September 30, compared with a 0.4% decline expected by analysts in a company-compiled poll.

Organic net sales ⁠declined ​3.6% in North America, ⁠its largest market, compared with a 6.7% drop expected by analysts, with growth in Guinness and Johnnie Walker negated by double-digit declines ⁠in the Don Julio and Casamigos tequila brands and Crown Royal whisky. Diageo has been grappling with sluggish demand in ​North America, and Lewis had pledged to restore performance in the region without sacrificing profits.

"Whilst the ⁠market remains challenging, and volatility continues given the geopolitical uncertainty and impact of the ongoing conflict in the Middle East on energy, ⁠supply ​and distribution, results in the first quarter represent a small step in the right direction," Lewis said in a statement. North America remained the group's biggest challenge, he added.

In August, Lewis laid out his ⁠strategy to cut $1 billion in costs, hone focus on fast-growing categories such as Guinness and canned cocktails, and ⁠lower prices on ⁠some brands. Diageo, which also makes Smirnoff vodka, Captain Morgan rum and Tanqueray gin, kept its organic net sales outlook broadly flat for the year.