Diageo used to say in its Guinness adverts, ‘Good things come to those who wait’. Patient investors who suffered a 40% share price decline under Debra Crew’s tenure as CEO are still wondering when the good news will arrive.
The fact the shares jumped on her departure is telling. It shows investors are ready for someone else to come in and fix the company.
There is only so long a board and investors will wait for a CEO to stop the share price rot. Crew had an incredibly difficult job to do but unfortunately, she’s run out of time. The share price is one way to represent the market’s view of a stock and investors have been royally disappointed since Crew took the hotseat in 2023.
The list of problems was long. First, it looked like management took their eye off the ball with regards to managing inventory levels in the supply chain for Latin America.
The company seemed oblivious to shifting consumer trends, with younger people showing less interest in drinking alcohol. At the same time, wealthier individuals cut back on luxury goods and that hurt Diageo’s spirits sales.
Fundamentally, Diageo looked lost, and investors had no idea where it was going. Finance boss Nik Jhangiani looks a safe pair of hands to steady the ship while the board search for a new CEO. Whoever gets the top job will have to bring new energy to the company.
Decisions will need to be made faster, asset sales look likely, and the balance sheet will need strengthening. That suggests a kitchen sink job first, and a new growth strategy afterwards.
Crew’s departure cuts the total number of female CEOs, including trust chairs, in the FTSE 100 to 12 currently in office. Two more are in the wings, with the appointment of Cindy Rose at WPP set to begin on 1 September and Zoe Yujnovich starting her role at National Grid on 16 November.
That means, bar any further female FTSE 100 CEOs leaving their roles in the interim, there will be 14 female CEOs in London’s blue-chip index before Christmas.
Powell under pressure
The UK stock market tried its very best to make progress but wobbled at the end of the trading day amid speculation that Donald Trump has lost patience with Federal Reserve chair Jerome Powell.
Markets in both the UK and US pulled back amid speculation that Trump was about to fire Powell. He hasn’t been shy in expressing displeasure in Powell’s decision-making, demanding the Fed bring down rates to help drive economic activity. He wants someone new behind the wheel at the central bank, and someone who will influence looser monetary policy.
Investors normally like the prospect of rate cuts, yet Trump’s potential interference might be a step too far in many people’s opinion. There are question marks over Trump’s ability to fire Powell over a monetary policy dispute yet it seems where there is a will, there is a way as far as the US president is concerned.
Today’s UK inflation shock had a pronounced impact on parts of the London market, good and bad. Inflation typically drives up commodity prices which explains why mining companies including Rio Tinto were in demand on the latest figures. Inflationary periods can also increase the attraction of hard assets such as metals.
Property-related stocks were down as investors feared UK interest rates might not fall as fast as previously hoped. Land Securities, Unite, Segro and Persimmon were all caught up in the gloom as rates staying higher for longer is negative for their valuations and for investment sentiment towards anything related to bricks and mortar.
The FTSE 100 closed 11.77 points lower at 8,926.55 as the spectre of inflation returned to haunt markets.
Bloomsbury Publishing gained 6.16% after confirming that full-year results remain on track, buoyed by continued strong demand for titles from authors such as Sarah J. Maas and J.K. Rowling.
Dan Coatsworth is investment analyst at AJ Bell
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