Diageo said organic net sales rose 1.4% in its fiscal first quarter, the three months to Sept. 30, as mid-single-digit growth in Asia Pacific and Latin America helped offset another decline in North America. The London-listed maker of Johnnie Walker, Guinness and Smirnoff kept its full-year guidance in the update, released on Nov. 5.

Reported net sales rose 1.2% to $4.93 billion from $4.88 billion a year earlier, held back by currency moves and disposals, according to a summary of the statement published by James Sharp & Co. For investors in Asia, the regional split is the point: Asia Pacific and India both grew in a quarter when North America shrank.

Chief Executive Dave Lewis, who is restructuring the company, called the quarter "a small step in the right direction," according to Interactive Investor.

Asia Pacific grows, North America shrinks

Diageo gave growth ranges rather than exact figures for its regions. Asia Pacific and Latin America and the Caribbean grew at a mid-single-digit organic rate. India and Europe, Middle East and Africa grew at a low-single-digit rate. North America fell at a mid-single-digit rate, which the company put down to continued market softness.

Interactive Investor reported that North American sales fell 3.6%, better than the 6.7% decline analysts had forecast. Lewis described the region as "our biggest challenge" and said the company had taken steps to make its offer more competitive there.

The headline figure flatters the underlying business. East African Breweries (EABL), where Diageo is the majority owner, grew at a double-digit rate and added 0.8 percentage point to group growth. Without EABL, organic net sales rose 0.6%, volumes slipped 0.1% and price and mix added 0.7%. Including EABL, volume rose 1.1% and price and mix added 0.3%.

Whisky, Guinness and Smirnoff ready-to-drink products drove the growth, the company said. Group volumes rose, but most of the gain outside Africa came from price and mix rather than from selling more cases.

Guidance kept, shares rally

Diageo repeated the fiscal 2027 targets it set at its capital markets day. It expects broadly flat organic net sales and organic operating profit growth in the low to mid single digits, helped by savings from changes to its operating framework and supply chain. It still expects North American organic net sales to fall at a mid-single-digit rate, based on an assumption that the U.S. spirits market shrinks about 3%.

Other targets were unchanged: a tax rate before exceptional items of about 25%, an effective interest rate of about 4%, capital spending of about $1.25 billion and free cash flow of about $2 billion after roughly $850 million of exceptional costs. The company expects to end the year near the middle of its target range of 2.5 to 3 times net debt to adjusted EBITDA, assuming its planned EABL transaction and the sale of the Royal Challengers Bengaluru cricket franchise, owned through its Indian unit, are completed.

Investors welcomed the update. Diageo shares rose to an eight-month high of 1,862.5 pence, Interactive Investor reported, and Bank of America set a price target of 2,080 pence. Diageo's American depositary shares rose about 2.6% in New York on Nov. 5, according to Business News Today. The gain came as the FTSE 100 rose as high as 10,948.24 that day, above its previous record close.

A recovery from a low base

The rally follows a difficult year. In February, Diageo cut its guidance for fiscal 2026 to an organic net sales decline of 2% to 3% and halved its interim dividend to 20 cents a share, according to AJ Bell. The shares fell 6.9% that day.

Since then, the company has set savings targets of about $850 million from operating changes and about $150 million from its supply chain. "Overall, Q1 was in line with expectations," he said.

For Asian investors, Diageo is one of the few large London-listed consumer companies where the region drives growth rather than drags on it. Asia Pacific grew faster than the group in the quarter, while India, where Diageo operates through its listed subsidiary United Spirits, grew more slowly. The company did not give figures for China or travel retail in its statement.

Diageo will report results for the six months to Dec. 31 early next year, its first full results under the fiscal 2027 targets.