Shares in Diageo (LSE: DGE) (NYSE: DEO.US) fell nearly 5% to 1,811p during early trade this morning, after the drinks company unveiled a weak set of results, with net sales falling 1.3% in the three months to 31 March.
The distiller is struggling in emerging markets due to currency volatility and weak consumer confidence. Political instability in Thailand also lowered trading confidence across multiple markets in Asia, where sales plummeted 19%.
In Western Europe, Diageo is benefiting from the gradual economic recovery, and sales increased by 1.2% in the quarter.
Performance was the most buoyant in North America, where consumer trends remain unchanged and sales grew 5.7% — in line with expectations.
Earlier in the week, Diageo launched a bid to take control of India’s United Spirits Ltd for $1.9bn.
The chief executive, Ivan Menezes, commented:
“The current emerging market weakness does not reduce our confidence in the long term growth opportunities of these markets and we have continued to invest to build our brands and routes to consumer for the future. Current trends will however impact top line growth this financial year, but strong management of our cost base means that we remain committed to the delivery of our margin expansion goals.”
After this morning’s price movement shares in Diageo may trade on a forward P/E of 18 and offer a potential income of 2.8%.
Of course, the decision to ‘buy’ — based on those metrics, today’s results and the wider prospects for the drinks sector — remains entirely up to you.
