Diageo Plans $500m in cost cuts as US tariffs kick in
US president Donald Trump's trade tariffs will cost $150 million annually at current levels, half of which it can mitigate, Diageo said in a statement Monday.
The distiller reiterated its guidance for the full year and expects sales growth to improve in the second half.
The company's shares rose as much as 2.4 per cent in early trading in London. They had fallen just over 15 per cent so far in 2025 through Friday's close.
READ MORE
Like rivals, Diageo has been hit by a slowdown in the US, its biggest market, and more recently higher trade friction that threatens to further dent consumer confidence.
That led the company to scrap its long-held medium-term sales target in February.
Organic net sales rose 5.9 per cent in the third quarter, beating analyst estimates, as wholesalers in North America stocked up ahead of anticipated tariff announcements. Strong performance of Don Julio lifted tequila sales.
Given that growth was driven by orders being pulled forward ahead of the tariff announcements, Diageo expects a weaker final quarter – though its second half performance overall will be an improvement on the first.
Diageo didn't give details on where it will cut costs. Rival Moët Hennessy said this month it would reduce its workforce due to shrinking demand as well as a tariff stand-off between the European Union and China over Cognac.
Citi analyst Simon Hales said Diageo's cost-saving program should be well-received by investors, and with the absence of new negatives, there was 'increasing confidence that Diageo is in control of what it can control.'
Diageo said the Asia Pacific region continued to weigh on sales. It also expects a slight decline in organic operating profit in the second half of its fiscal year compared to last year, which includes the impact of the tariffs.
'Tariff uncertainty represents a distraction, however Diageo is in recovery mode,' Jefferies analyst Edward Mundy said in a note. – Bloomberg
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
RTÉ News
4 hours ago
- RTÉ News
Euro zone inflation picks up to ECB target of 2%
Euro zone inflation edged up last month to the European Central Bank's 2% target, confirming that the era of runaway prices is over and shifting policymaker focus to trade war-induced economic volatility. Inflation in the 20 nations sharing the euro currency crept up to 2% in June from 1.9% a month earlier, in line with expectations in a Reuters poll of economists, as energy and industrial goods continued to pull down prices, offsetting quick services inflation. Underlying inflation, a closely watched measure that excludes volatile food and fuel prices, meanwhile held steady at 2.3%, in line with expectations. Anticipating this fall, the ECB has lowered interest rates from record highs by two full percentage points over the last year, and debate has turned to whether it needs to ease policy further to prevent inflation becoming too low given weak growth. The development in services costs, which have been stubbornly high for years, is pivotal as it has raised fears that domestic inflation could get stuck above 2%. Last month, services inflation edged up to 3.3% from 3.2%, as prices rose 0.7% on the month, supporting the argument of policy hawks that domestic inflation remains uncomfortably high, reducing the risk of undershooting. Financial investors expect one more ECB rate cut to 1.75% towards the end of the year, then anticipate a period of steady rates before possible increases towards the end of 2026. The outlook, however, is complicated by the fact that it depends on the outcome of a trade dispute between the EU and the US President Donald Trump's administration. For now, the conflict has reduced price pressures because it has sapped economic confidence, pushing up the value of the euro and lowering energy prices. Indeed, the euro zone's economy is barely growing, with full-year expansion expected at less than 1%, as industry struggles after a multi-year recession, with private consumption weak and investment low. If US trade barriers stay, the EU is likely to retaliate and that is bound to be inflationary. Firms will then start rearranging value chains, which would add to increased production expenses. Once the cost of the green transition and the ageing of the working age population are factored in, then prices could come under more sustained upward pressure, economists say.
Irish Times
4 hours ago
- Irish Times
Banks and defence sectors weigh on European shares
European shares fell on Tuesday on the back of poor performances from the banking and defence sectors, as uncertainty continues to weigh on investors. London bucked the European trend to close in the green. Dublin The Iseq All-Share index started the third quarter of the year in the red, down 87.71 points to 11,334.00. The Dublin stock exchange's losses were led by Kenmare Resources which dropped 3.61 per cent. Further developments around a possible acquisition of the firm by former boss Michael Carville emerged in recent days. In a mixed day for the banks, AIB fell 2.79 per cent to €6.79, joined by Bank of Ireland which dropped 1.66 per cent to €11.885, while Permanent TSB was steady. Defensive stock Uniphar plc, the healthcare services group, dropped 2.27 per cent to €3.665, while Ryanair dipped 0.83 per cent. READ MORE Of the big caps, Glanbia were the winners on the day, rising 2.64 per cent to €12.83 as its share price continues to recover. LONDON London's internationally oriented FTSE 100 rose 0.28 per cent, while the domestically-focused midcap index added 0.54 per cent. Midcap stocks ended June by logging their best quarter in over four years while the blue-chip index logged monthly losses. Drugmaker AstraZeneca's shares rose 2.7 per cent after multiple sources told the Times that chief executive Pascal Soriot was considering moving the company's listing to the US. Traders are currently pricing in a 78 per cent chance of a rate cut by the Bank of England in August. Precious metal mining stocks led sectoral gains, rising 2.4 per cent as safe-haven gold jumped over 1 per cent on the weaker dollar and US tariff uncertainty. Endeavour Mining and Fresnillo added 2.8 per cent and 1 per cent, respectively. Hochschild Mining gained 5.3 per cent. Losses were led by aerospace and defence index, which declined 2.2 per cent. Rolls-Royce fell 2.9 per cent and Babcock lost 2.5 per cent. Food retailer Sainsbury's shares slid 1.1 per cent despite reporting a higher-than-expected rise in quarterly sales. Standard Chartered Bank shares fell 2 per cent after liquidators for Malaysia's sovereign wealth fund 1MDB sued the bank in Singapore alleging fraud that led to more than $2.7 billion (€2.29) in losses more than 10 years ago. In other news, Britain's competition watchdog cleared Aviva's £3.7 billion ($5.08 billion) takeover of smaller rival Direct Line that will create the UK's largest home and motor insurer. Shares of Aviva were up 0.8 per cent, while those of Direct Line rose 0.5 per cent Europe European shares ended slightly lower on Tuesday, with industrials and banks the biggest drags as investors weighed uncertainty over US trade deals with the July tariff deadline fast approaching and discussions on a US tax bill. The pan-European STOXX 600 index closed 0.2 per cent lower, coming off a more than 1 per cent fall for the month of June. Most regional bourses clocked declines, though UK's blue-chip FTSE 100 was an outlier with a 0.3 per cent rise. Industrials led losses among the major STOXX subsectors with a 1.7 per cent fall. Defence-related companies including Germany's Rheinmetall, Sweden's Saab and Italy's Leonardo all fell more than 5 per cent each. Banks also slid 1.3 per cent, with Germany's Deutsche Bank down the most with a 3.6 per cent decline. New York The S&P 500 and the Nasdaq fell from record highs in midafternoon trading on Tuesday, as Tesla shares were hit by a renewed spat between chief executive Elon Musk and US President Donald Trump, while better-than-expected economic data backed the US central bank's patient stance on rate cuts. Tesla dropped after Mr Trump threatened to cut off the billions of dollars in subsidies that Mr Musk's companies get from the federal government, after Mr Musk revived his criticism of Mr Trump's wide-ranging tax-cut and spending bill. The major indexes were mixed, but technology stocks led the decline among the major S&P sectors, while material stocks and the healthcare sector climbed. Shares of US-based casino operators rose after Macau reported a rise in June gambling revenue. Wynn Resorts and Las Vegas Sands, as well as MGM Resorts International climbed. – Additional reporting, Reuters, PA.
Irish Times
5 hours ago
- Irish Times
US Senate passes Trump's sweeping tax and spending Bill
The Republican-controlled US Senate passed president Donald Trump 's tax and spending Bill on Tuesday, signing off on a massive package that would enshrine many of his top priorities into law while adding $3.3 trillion to the national debt. After days of haggling and delays in the Senate, the Bill now heads back to the House of Representatives for final approval. Mr Trump has pushed lawmakers to get it to his desk to sign into law by the July 4th Independence Day holiday. Mr Trump's Republicans have had to navigate a narrow path while shepherding the 940-page Bill through a Congress that they control by the slimmest of margins. READ MORE With Democrats lined up in opposition, Republicans have had only three votes to spare in both the House and Senate as they wrangled over specific tax breaks and healthcare policies that could reshape entire industries and leave millions of people uninsured. Republican Senate majority leader John Thune speaks to reporters after the vote. Photograph: Jim Lo Scalzo/EPA Yet they have managed to stay largely unified so far. Only three of the Senate's 53 Republicans joined with Democrats to vote against the package, which passed 51-50 after vice-president JD Vance cast the tie-breaking vote. The vote in the House, where Republicans hold a 220-212 majority, is likely to be close as well. An initial version passed with only two votes to spare in May, and several Republicans in that chamber have said they do not support the version that has emerged from the Senate, which the non-partisan Congressional Budget Office (CB) estimates will add $800 billion more to the national debt than the House version. The House Freedom Caucus, a group of hardline conservatives who repeatedly threatened to withhold their support for the tax Bill, is pushing for more spending cuts than the Senate offered. 'The Senate's version adds $651 billion to the deficit – and that's before interest costs, which nearly double the total,' the caucus posted online on Monday, 'That's not fiscal responsibility. It's not what we agreed to.' A group of more moderate House Republicans, especially those who represent lower-income areas, object to the steeper Medicaid cuts in the Senate's plan. 'I will not support a final Bill that eliminates vital funding streams our hospitals rely on,' representative David Valadao, a California Republican, said during the weekend debate. Still, House Republicans are likely to face enormous pressure to fall in line from Mr Trump in the days to come. The 'One Big Beautiful Bill Act' would make permanent Mr Trump's 2017 business and personal income tax cuts, which are due to expire at the end of this year, and dole out new tax breaks for tipped income, overtime and seniors that he promised during the 2024 election. It provides tens of billions of dollars for Mr Trump's immigration crackdown and would repeal many of Democratic president Joe Biden's green-energy incentives. The Bill would also tighten eligibility for food and health safety net programmes, which non-partisan analysts say would effectively reduce income for poorer Americans who would have to pay for more of those costs. The CBO estimates the latest version of the Bill would add $3.3 trillion to the $36.2 trillion debt. That effectively serves as a wealth transfer from younger to older Americans, analysts say, as it will slow economic growth, raise borrowing costs and crowd out other government spending in the decades to come. The Bill also would raise the nation's borrowing limit by $5 trillion, postponing the prospect of a debt default this summer that would roil global markets. Republicans say the Bill will help families and small businesses and put benefit programmes such as Medicaid on a more sustainable path, and they have broadly agreed on its main contours. But they have struggled to agree on the Medicaid funding mechanism and a tax break for state and local tax payments that is a top priority for a handful of House Republicans from high-tax states including New York, New Jersey and California. Others worry that a crackdown on a funding mechanism for the Medicaid health program could lead to service cutbacks in rural areas. Some on the party's right flank, meanwhile, have pushed for deeper Medicare cuts to lessen its budgetary impact. Mr Trump has singled out those Republican dissenters on his Truth Social network and excluded them from White House events, and few have been willing to defy him since he returned to office in January. Senator Thom Tillis of North Carolina, one Republican who voted against the Bill, said on Sunday he would not run for re-election next year. – Reuters
