New Diageo boss ‘Drastic Dave’ Lewis has made the “difficult decision” to cut the company’s dividend to shareholders, as it wrestles with falling sales and a $22bn debt pile.
Lewis set out the case for tightening the balance sheet to shareholders this morning, after the company revealed it had been forced to downgrade its profit and sales expectations for 2026.
Shares crashed 7% in reaction to Lewis’ maiden set of Diageo results as markets in London opened this morning.
Interim results showed revenues slip 4% to $10.5bn (£7.7bn) in the first half to 31 December 2025. The decline was worse than some analysts had forecast, with a 2.8% drop in organic sales exceeding aggregator Vuma’s consensus of a 2% fall.
“Strong” organic sales growth in Europe, Latin America and the Caribbean and Africa was more than offset by tough trading in North America and Asia. A 23% decline in tequila sales dragged the North American division’s revenue down 6.8% as consumers spied “more affordable alternatives”, and “very weak” Chinese white spirits performance offset growth in India to pull the Asia Pacific division’s sales down 11.1%.
Diageo’s sales in Great Britain grew 2.9%, primarily thanks to double-digit growth in Guinness, which was particularly strong in the on-trade and in its non-alcoholic Guinness 0.0 offering.
The unexpectedly poor performance in North America and China led Diageo to lower its full-year forecasts for organic sales in 2026 to 2%-3%. Analysts had predicted a drop of just 1.1%.
Group full-year operating profits forecast was also slashed to a range of flat to low-single-digit growth, compared with previous guidance of low- to mid-single-digit.
‘Significant opportunities’
“Only several weeks in I can already see significant opportunities for Diageo to act more decisively to enhance its competitiveness and broaden the portfolio offering, leading to higher growth,” said Lewis, who joined the group on 1 January with a remit to revive the Smirnoff and Johnnie Walker maker’s fortunes.
He identified three key areas for the company to focus on: competitive category strategies, winning with “relevant brands”, “customer, customer, customer,” and a “redesign” of the company’s operating framework.
“To deliver on these opportunities, we need to create more financial flexibility,” Lewis said.
“Accordingly, the board has taken the difficult decision to reduce the dividend to a more appropriate level which will accelerate the strengthening of our balance sheet.”
Speaking on a call to investors following the results, Lewis added that “it was not an easy decision to make, but [the board] believes it was the right one”.
With the challenges to North America, the portfolio “needs some time and investment” to become more competitive, he said. Investment in Guinness’ capacity and capability would likewise be necessary.
“We want to do both of these things and strengthen the balance sheet. We will make disposals if appropriate, but we will not sell brands cheaply. All this leads to a change in the dividend policy,” he said.
“It gives us the space we need to turn around the business and the optionality around capital returns to shareholders as this turnaround unfolds.”
Dividends will be reduced to a 30%-50% payout, with a 50 cents annual minimum dividend.
Diageo’s share price has suffered markedly since the pandemic, and in January 2026 reached a decade low of just 1,577p – less than half of the price it had enjoyed in 2022.
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