Guinness and Johnnie Walker owner Diageo reduces full year guidance and trims investor dividend in London as profits slide and US demand cools

Something big is shifting inside one of the world’s most recognisable drinks companies.

Diageo, the powerhouse behind brands like Guinness and Johnnie Walker, has taken another tough step as it tries to steady the ship.

The company has cut its financial outlook yet again and made a decision that shareholders rarely welcome — it has slashed its dividend payment.

And this is happening just as new chief executive Dave Lewis settles into the top job.

A New Boss, A Difficult Start

Lewis, best known for his turnaround work at Tesco, officially stepped into the Diageo role at the beginning of the year.

He hasn’t wasted time assessing the situation — and the message is clear: there’s serious work to do.

Speaking only weeks into the job, he admitted the company must “act more decisively” to restore competitiveness and unlock growth.

That’s corporate language for tightening up operations, improving margins, and making sharper strategic choices.

The numbers tell the story.

For the six months ending December 31, underlying operating profits fell 2.8 percent to 3.26 billion dollars.

Sales also slipped by 2.8 percent.

While that may not sound catastrophic, for a company of Diageo’s scale and global dominance, it’s enough to raise eyebrows.

The US Problem Is Hard to Ignore

A major pressure point continues to be the United States, one of Diageo’s most important markets.

American consumers have been tightening spending amid inflation and shifting drinking habits.

Premium spirits — once a strong growth driver — are not flying off shelves like they did during the post-pandemic boom.

There’s also a broader industry shift underway.

Younger consumers are drinking less alcohol overall, experimenting with low- and no-alcohol alternatives, and being more selective about premium purchases.

Diageo has invested heavily in premiumisation over the past decade, so any slowdown in that segment hits hard.

Because of these headwinds, the company has downgraded its full-year expectations for the second time in just three months.

Sales are now expected to fall between 2 and 3 percent, while earnings are forecast to be flat or grow only slightly.

Dividend Cut Sends a Clear Signal

Perhaps the most striking move is the dividend reduction.

Diageo has more than halved its interim dividend — a decision boards do not take lightly.

For income-focused investors, dividends are a sign of stability and confidence.

Cutting them often signals that management wants to preserve cash and strengthen the balance sheet.

Lewis framed the move as necessary to create “financial flexibility.”

In simpler terms, the company needs breathing room.

By lowering dividend payments, Diageo frees up capital to reduce debt, invest strategically, and absorb market volatility.

It’s a defensive but potentially smart long-term play.

Cost Cutting Moves Into High Gear

Cost savings are now a major part of the recovery plan.

Diageo has accelerated its efficiency programme and expects around half of the planned savings to land in the current financial year.

That could involve streamlining operations, simplifying supply chains, reducing overheads, and possibly reshaping parts of the portfolio.

Diageo’s brand stable is vast — from tequila and vodka to rum and ready-to-drink cocktails — and managing that complexity efficiently is crucial.

Lewis has hinted that opportunities exist to sharpen the portfolio and improve competitiveness.

That could mean doubling down on high-growth categories or trimming underperforming brands.

A Strategy Reveal Is Coming

Investors won’t have to wait too long for more detail.

Lewis is preparing an updated strategic roadmap, expected to be unveiled later this summer.

Given his history at Tesco — where he helped stabilise the supermarket after a major accounting scandal and declining performance — expectations are high.

At Tesco, he focused heavily on cost discipline, operational focus, and rebuilding trust. Those themes may well carry over into Diageo’s refresh.

The company insists that these painful short-term decisions are meant to protect its long-term position as the leading international spirits group.

The message from the board is that strengthening the balance sheet now will allow Diageo to drive stronger shareholder value in the years ahead.

The Bigger Industry Picture

Diageo is not alone in facing turbulence.

The global spirits sector is navigating slower consumer demand, currency pressures, regulatory tightening in certain markets, and evolving drinking trends.

Premiumisation still matters, but it’s no longer a guaranteed growth engine.

Meanwhile, emerging markets offer potential — but often come with volatility and political risk.

Against this backdrop, Diageo’s reset looks less like panic and more like proactive repositioning.

What’s Next?

All eyes now turn to the summer strategy update.

Investors will want clarity on three key things:

How quickly can sales stabilise, particularly in the US?

How deep will cost cuts go?

And will the dividend remain at this lower level for an extended period?

If Lewis can outline a convincing growth pathway — possibly including innovation in low-alcohol products, expansion in emerging markets, and sharper portfolio management — confidence could return.

But if US weakness drags on and global demand remains soft, recovery may take longer than hoped.

Summary

Diageo has downgraded its financial outlook again and more than halved its interim dividend as new chief executive Dave Lewis begins a turnaround effort.

Underlying profits and sales both fell 2.8 percent in the first half of the financial year, with ongoing weakness in the US market weighing heavily.

The company is accelerating cost savings, aiming to create financial flexibility and strengthen its balance sheet.

Lewis is preparing a new strategy, set to be revealed later this summer, as he works to restore growth and competitiveness.

For now, Diageo is tightening its belt — hoping that today’s tough choices lay the foundation for a stronger tomorrow.