Diageo CEO gets quarterly sales boost in first stage of turnaround

Diageo posted an unexpected rise in first-quarter sales on Thursday ‌as an improvement in its struggling US business injected some early momentum into CEO Dave Lewis' closely watched plan to turn around the world's top 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, especially in the US where it has also been losing market share.

Shares in the leading spirits ‌maker by market value were 2.65% higher at 1124 GMT after it 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. Sales fell 3.6% in North America, its largest market, but that was less than the 6.7% drop expected by analysts. The company ⁠cited growth ​in brands like Guinness beer ⁠and the timing of some shipments, though its tequila labels and Crown Royal whisky still endured double-digit declines.

The results "represent a small step in the right direction," Lewis said in ⁠a statement, adding, however, that the market remains tough and ongoing conflict and geopolitical turbulence are driving volatility. NORTH AMERICAN MARKET REMAINS A CHALLENGE

Diageo does not expect ​to revive growth in North America for years. Lewis plans to restore growth via price and pack size changes, but told investors ⁠on a call that such initiatives would take at least nine months to begin bearing fruit. Already starting to pay off, however, was a shift towards fast-growth, convenient drinks like ⁠canned ​cocktails. Diageo said its Smirnoff Ice label had seen 15% growth globally and strong demand in North America.

"He's pushed that harder and that's really working," said Richard Scrope, manager of the VT Tyndall Global Select fund, which invests in Diageo, adding the company still had a ⁠long way to go. Lewis has also cut thousands of jobs and promised to save $1 billion over three years. His plans have boosted optimism ⁠after years of turbulence, helping shares, though ⁠they remain well below levels seen in 2022.

Diageo has also moved to sell assets, including its majority stake in Kenyan unit East African Breweries to Japan's Asahi Group Holdings. Including EABL, Diageo's group sales rose ‌1.4%.