Shares in spirits maker Diageo (LON:DGE) hit a year-high after Q1 sales surprised to the upside. Organic net sales in the quarter to September rose 1.4% against market forecasts of a 0.6% drop.
Q1 sales growth surprise
For the three months to September, net sales rose 1.2% to $4.93 billion, with positive organic growth of 1.4% offset by 0.2% of negative inputs. The gains were mainly volume-driven, helped by a small contribution from price and mix.
The North American market remained soft, forcing the firm to focus on its turnaround plan. The Don Julio, Casamigos and Crown Royal experienced double-digit declines, which were only partly offset by higher sales of Johnnie Walker.
EMEA (Europe, Middle East and Africa) sales rose thanks to targeted pricing in order to grow volumes. Spirits and ready-to-drink products were the key drivers of growth, with Johnnie Walker sales up double digits.
A double-digit increase in travel sales drove volume growth in Asia Pacific, offsetting weak demand in Taiwan. Sales of both Chinese white spirits and premium spirits were flat in Mainland China.
Diageo Q1 2026 organic sales growth
| Organic growth (%) | Volume growth (%) | Price/mix (%) | |
| North America | -3.6 | -3.7 | +0.1 |
| EMEA | +2.4 | +4.4 | -2.0 |
| Asia Pacific | +4.1 | +6.2 | -2.1 |
| LatAm & Caribbean | +4.8 | +7.0 | -2.2 |
| India | +3.4 | -5.8 | +9.2 |
| Group | +1.4 | +1.1 | +0.3 |
Source: Company accounts
Turnaround bearing fruit
CEO Dave Lewis said achieving growth in Q1 while implementing major changes was ‘a small step in the right direction’. Lewis is overseeing a major turnaround at Diageo after investors called time on previous CEO Debra Crew in July last year.
The CEO added he was ‘pleased’ with growth across EMEA, Asia-Pacific, Latin America & the Caribbean and India. ‘In North America, we continue to focus on making our offer more competitive, and whilst this remains our biggest challenge, clear actions are underway’, said Lewis.
The market has taken its time buying the turnaround story at Diageo, but since March this year the shares are up nearly 40%. As CEO Dave Lewis says, Q1 represents a small step in the right direction and there’s still plenty of work to do.
What’s heartening is volumes are improving, despite the macro backdrop and the preference among younger consumers for low- or no-alcohol drinks. The gains were mostly driven by Johnnie Walker, with help from Guinness, so work is needed to revive the group’s other brands.
Still to come though is the sale of Diageo’s 65% stake in EABL (East African Breweries) to Asahi, which should complete by year-end. That will bring in $2.3 billion (£1.7 billion) which Lewis can reinvest in reviving lagging brands to drive further sales growth.
