Diageo sales jump on premium spirits and bar restocking

By Richa Naidu

LONDON (Reuters) -Drinks group Diageo on Thursday reported first-half sales up nearly 16%, buoyed by high-end spirits for home use while bars increased orders as they reopened after coronavirus lockdowns.

The maker of Johnnie Walker whisky, Tanqueray gin and Guinness stout also said it will speed up its share buyback programme, aiming to complete the 4.5 billion pound ($6 billion)plan in its 2023 financial year rather than by the end of June 2024.

Operating profit rose by 22.5% to 2.7 billion pounds in the six months to Dec. 31, with its operating margin up by 190 basis points, Diageo said.

Net sales increased by 15.8% to 8 billion pounds.

The world’s largest spirits maker has benefited from shoppers stocking up on alcohol at home during the COVID-19 pandemic, often trading up to more expensive types of alcohol.

Sales of premium products made up more than half of net sales.

Then as lockdowns eased, particularly in Europe and North America, bars have had to restock, buying more than the previous year. Net sales grew 13% in North America and were up 27% in Europe.

Rival Remy Cointreau this week said it is confident demand for its premium cognac in China, the United States and Europe will underpin profit growth this year after the French spirits group beat quarterly sales forecasts.

The European beverages sector outperformed the wider market almost uniformly in the fourth quarter, Bernstein analysts said. The distillers led the way while global brewers were more subdued because of rising raw material costs.

Shares in Diageo have repeatedly touched record highs since the company said in November that it expects organic net sales growth to be between 5% and 7% for its 2023-2025 financial years, against 4% to 6% growth over 2017-2019.

On Thursday the shares were up 1.3% at 36.92 pounds.

Deutsche Bank last week raised Diageo’s target price to 46.50 pounds from 45.30 pounds.

($1 = 0.7456 pounds)

(Reporting by Richa NaiduEditing by David Goodman)