Shares in Diageo have bounced after the Guinness owner’s chief executive, “Drastic Dave” Lewis, passed the first big test of his plan to revive the flagging fortunes of the UK-based drinks company.
Lewis, a former Tesco boss known in the City for his cost-cutting zeal, promised to deliver $1bn of savings over two years through a “significant” restructuring aimed at making the company more agile.
He said this could be achieved without eroding profits and appeared to confirm rumours that the worldwide restructuring could lead to job losses, acknowledging the “very significant impact” on Diageo colleagues.
Shares in the company rose by 10% in trading immediately following the release, indicating early contentment with the turnaround plan among investors.
Lewis’s appointment was announced last November following a lacklustre period under his predecessor, Debra Crew, a former captain in US military intelligence who took over after the sudden death of the longtime boss, Sir Ivan Menezes.
The global purveyor of brands such as Johnnie Walker and Smirnoff had thrived in the period immediately after the Covid-19 pandemic, but fell out of favour with investors as Crew’s tenure was tainted by strategic errors and a shock profits warning, leading to her exit.
Diageo’s share price jumped last year when Lewis was parachuted in to lead a turnaround but fell in February, after he slashed Diageo’s dividend and reported weak demand in the US and China.
The dividend will be kept at its reduced level of $0.50 per share, Diageo said on Thursday, as it reported net sales down by 2% to $19.6bn (£14.6bn) in the year to the end of June 2026.
Operating profit fell by 27% to $3.16bn including one-off charges related to Lewis’ restructuring of the business and write-downs of brands such as Don Papa rum.
Lewis’s two-year restructuring programme was already underway, the company said, with $1bn in annual savings expected from an overhaul costing $1.2bn.
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