In the summer, Diageo, the owner of Johnnie Walker whisky, Smirnoff vodka and Guinness published disappointing year-end results, a profit warning for fiscal 2025 and the sudden departure of chief executive Debra Crew.
The shares languish near nine-year lows, amid worries over weak end markets, generational changes in drinking habits, notably in America, where industry data point to a fourth straight year of total alcohol consumption in 2025, and inadequate management controls in Latin America.
A cooling in the once red-hot tequila market and China’s ongoing crackdown on conspicuous consumption are both further hindrances, say AJ Bell analysts, although beer volumes in emerging markets offer some rare good news for the drinks industry this year.
From Diageo’s perspective, Guinness and Guinness Zero are seemingly more popular, and fashionable, than ever.
For the first quarter, analysts expect a drop in sales on an organic basis for the July-to-September period of some 2%, for a headline net sales figure of some $4.8 billion.
Other FTSE 100 companies reporting figures this week include BP, BT and Marks & Spencer that will also give an indication as to the state of the economy ahead of the Chancellor’s budget.
Even as energy prices have fallen, BP stock has rebounded by more than 40% from its lowest level this year and is hovering at the highest point since February.
It is also fending off demands for change from Elliot Management after making a number of key personnel changes and for restoring its focus on core oil & gas.
BT’s shares are trading near three-year highs. Sentiment has been helped by Bharti Global’s purchase last summer of the 24.5% stake previously held by Altice, consolidation in the mobile market thanks to the Vodafone-Three deal and merger, and acquisitions activity in the telecoms sector worldwide.
AJ Bell analysts say BT has done its own bit by meeting forecasts, not missing them, and increasing its dividend.
Marks & Spencer stock has jumped by 25% from its lowest point in January despite the dour economic backdrop and the effects of a cyber-attack this year.
Investors seem to have plenty of faith in the power of the brand and the food offering, plus the ongoing operational improvements in the clothing business, so the interim results will be a good test of whether shoppers and customers feel the same way.
Chief executive Stuart Machin has already forecast a £300 million hit to profit from the cyber-attack in the year to March 2026, before any insurance claims, cost reductions and trading activity to manage the after-effects. Investors will look toward the like-for-like sales growth trends in food and particularly clothing in the UK and Ireland to gauge whether customer loyalty is suffering or not.
Analysts are looking for sales of £6.5 billion, pretty much flat on a year ago, and stated pre-tax profit of £92 million and adjusted pre-tax profit of £152 million, down by 73% and 63% respectively from a year ago.
UBS said that a lack of anticipated upgrades for the year at the first-half results – given the material yet one-off nature of the cyber incident alongside broader UK macro concerns – means the shares have been down 2% since April, lagging the broader sector.
“With all operations fully restored by second week of August, we expect the market to look beyond the noisy H1 results into Sept/Oct exit rates,” the bank said.
Half-year results are also due from supermarket chain Sainsbury’s and Hargreaves Lansdown equity analyst Aarin Chiekrie said: “Sainsbury’s delivered a strong start to the year, with all parts of the business performing well. Solid top-line growth and ongoing efficiency improvements show that the group isn’t resting on its laurels, but management expects profits for the current year to remain broadly flat.
“This outlook reflects an expected £140 million increase in costs linked to changes in employers’ National Insurance contributions and the national minimum wage.
“Investors don’t think price competition has been as intense as the sector had feared at the start of the year. Helped by growing real wages, UK consumers are proving resilient.
“And if Sainsbury’s can keep growing volumes and gaining market share, there could be room for management to upgrade its cautious full-year guidance. For the first half, the consensus points towards retail underlying operating profit of around £500 million.”
Bank to declare interest rate decision
Berenberg economist Andrew Wishart expects the Monetary Policy Committee (MPC) to vote 6-3 in favour of keeping bank rate on hold, thereby ending a sequence of five once-per-quarter 25 basis points cuts.
“The risk that robust nominal demand encourages companies to rebuild their profit margins by raising prices outweighs the downside surprise in wage growth in August and in CPI inflation in September, in our view,” he said.
However, TD Securites and Danske Bank join Goldman Sachs and Nomura in expecting a 25 basis point cut.
TD Securities said: “The continued disinflation path and recent downside surprises are reasons for Governor [Andrew] Bailey to deliver a tie-breaking vote in favour of bringing bank rate to 3.75%. However, we acknowledge the close balance of risks in this decision, which could lead to postponing the cut to December.”
Danske said: “We see chances slightly above 50%. Recent data has confirmed that the cooling of the labour market continues but not at an alarming pace.”
DIARY
Monday 3 November
- Purchasing managers’ indices (PMIs) for manufacturing industries
- Quarterly results from Ryanair
Tuesday 4 November
- Full-year results from Associated British Foods (owner of Primark)
- Trading updates or quarterly results from BP and Domino’s Pizza
Wednesday 5 November
- Half-year figures from Marks & Spencer
- Trading statements or quarterly updates from Barratt Redrow and Watches of Switzerland
Thursday 6 November
- First-half results from BT, National Grid, Sainsbury and Auto Trader
- Trading statements or quarterly updates from AstraZeneca, Diageo and Smith & Nephew
- Interest rate decision from the Bank of England
- Purchasing managers’ index (PMI) for the UK construction industry
- EU inflation
Friday 7 November
- Quarterly results from International Consolidated Airlines
- Halifax UK house price index
- US non-farm payrolls, unemployment rate and wage growth
source