Diageo’s organic operating profit declined by 0.7%, mainly due to continued investment in overheads, partly offset by slight gross margin expansion.

Diageo has released its FY25 results for the year ended June 30, which showed a 27.8% decline in reported operating profit, which the business attributed to exceptional impairment and restructuring costs, unfavourable foreign exchange and a decline in organic operating margin.

Reported net sales of $20.2 billion declined 0.1% due to unfavourable foreign exchange of (0.6)% and acquisition and disposal adjustments of (1.1)%, partially offset by hyperinflation adjustments and organic net sales growth.

Excluding the impact of the Cîroc transaction, organic operating profit declined 1.0%.

On 7 April 2025, Diageo entered into a strategic partnership with Main Street Advisors.

As part of the transaction, Diageo transferred its majority ownership interest in Cîroc in North America in exchange for interest in Lobos 1707 Tequila globally.

The transaction was completed in June 2025.

As a result, Cîroc in North America is no longer consolidated in the group’s financial statements and is now accounted for as an investment in associate.

Travel retail 

Diageo improved net sales growth in North America by 1.5% and saw a return to form in LATAM and the Caribbean with a 9.2% rise in organic net sales, as well as in Africa, where the same metric grew 10.5%.

A weaker performance in China and GTR was only partially offset by growth in the Indian market.

Diageo noted: “Organic operating profit declined 11.0%, driven by adverse market and category mix, particularly the decline in Travel Retail Asia. Marketing investment declined 2.5%, largely driven by reduced investment in China, which was partially offset by increased spend in India.”

Travel Retail Asia net sales declined 24.3%, due to softer consumption and continued retail inventory destocking. Despite this, the business gained share, driven by the Johnnie Walker portfolio and Don Julio.

Guidance on tariffs

Diageo also addressed the ongoing tariff situation and edified its strategy concerning as much, with the following statement: “We have continued to undertake considerable contingency planning in recent months and are focused on what we can control in relation to tariffs.

Assuming the current 10% tariff remains on UK and 15% European imports into the US, that Mexican and Canadian spirits imports into the US remain exempt under the United States – Mexico – Canada Agreement (USMCA), and that there are no other changes to tariffs, the unmitigated impact of these tariffs is estimated to be c.$200 million on an annualised basis.

As a result of our extensive supply chain and broad and advantaged portfolio, we have undertaken a number of actions to help mitigate the potential impact including inventory management, supply chain optimisation and re-allocation of investments. Given the actions to date and before any pricing, we expect to be able to mitigate around half of this impact on operating profit on an ongoing basis.”

Nik Jhangiani, Interim Chief Executive commented: “I am pleased to report on our fiscal 25 results which in a challenging year, were in line with our guidance. We delivered 1.7% organic net sales growth reflecting the strength of our portfolio and our diversified footprint.

While we are encouraged by areas of progress and the standout performance from Don Julio, Guinness and Crown Royal Blackberry, there is clearly much more to do across our broader portfolio and brands.”

Diageo’s organic net sales growth of 1.7% was driven by organic volume growth of 0.9% and positive price/mix of 0.8%. Excluding the impact of its Cîroc transaction, organic net sales growth was 1.5%, with 0.8% volume growth and 0.7% price/mix.

Jhangiani continued: We recognise the need to drive meaningful growth opportunities in an evolving TBA landscape, and we are sharpening our strategy to accelerate growth. Our Accelerate programme is progressing well and is central to creating a more agile operating model. As such, I am pleased to announce that we are increasing our cost savings target by c.$125m, to c.$625m over the next three years.

We are also committed to strengthening our balance sheet and expect to deliver c.$3 billion free cash flow in fiscal 26, increasing financial flexibility whilst continuing to invest for longer term growth.

While macroeconomic uncertainty and the resulting pressure on consumers continues to weigh on the spirits sector, we believe in the attractive long-term fundamentals of our industry and in our ability to continue to outperform as the TBA landscape evolves. We are focused on what we can manage and control and executing at pace. The Board and management are committed to delivering improved financial performance and stronger shareholder returns on a sustained basis.

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