Diageo today scrapped a key sales target amid the uncertainty facing its tequila and Canadian whisky brands.
The drinks giant’s results came as a one-month pause for US tariffs on Mexico and Canada imports helped steady market sentiment.
Alongside Diageo, the shares of Vodafone fell today despite the company’s improved UK performance.
Market update: FTSE 100 falls amid Diageo and Vodafone pressure
10:42 , Graeme EvansCalmer conditions for global markets today failed to help Diageo and Vodafone after updates triggered more heavy selling of the FTSE 100 stalwarts.
Diageo’s withdrawal of mid-term guidance amid the uncertainty caused by planned US tariffs on its tequila and Canadian whisky brands caused shares to fall by 3% to their lowest level since 2017.
The stock later recovered to stand 15p lower at 2350p, still representing a fall of more than 30% in the past two years.
Half-year results today showed a return to underlying sales growth, driven by price and mix after a 0.2% volume decline. Reported operating profit declined 4.9%.
Chief executive Debra Crew hailed the company’s momentum but said this progress was threatened by the planned implementation of tariffs in the US.
North America contributed 38% of Diageo’s sales in the first half of its financial year, with about 45% of its products for sale in the US coming from Mexico and Canada.
Diageo has removed medium-term guidance of 5%-7% net sales growth, reflecting macroeconomic and geopolitical uncertainty in many of its key markets.
AJ Bell investment director Russ Mould said: “If tariffs are eventually imposed then it will be a test of Diageo’s pricing power to pass on these extra costs to consumers.
“The financial results themselves weren’t outstanding, even though group revenue came in slightly ahead of forecasts.
“The dividend was held flat, in a sign of the uncertain outlook and big spirits brands like Tanqueray, Gordon’s and Smirnoff sales all under pressure.”
There was some cheer for Diageo last night when the US announced that 25% tariffs planned for today on Mexico and China imports were on hold for a month.
While this helped volatility to subside following yesterday’s rollercoaster session, markets remain fearful of a US-China trade war after Beijing today retaliated with tariffs of its own on some US products and companies.
The FTSE 100 index stood 22.42 points lower at 8561.14, while the FTSE 250 index lost 21.26 points to 20,690.50.
Vodafone shares fell 4.9p to 65.16p, a reverse of 7% as the mobile phone giant’s valuation returned towards the two-decades low seen last spring.
The selling pressure came as another big sales decline in Germany offset an acceleration in UK service revenue growth of 3.3% in the third quarter.
Chief executive Margherita Della Valle: “We are on track to grow in line with our full year guidance for this year, which we reiterate today, and are looking forward to a stronger Vodafone in the years ahead.”
Other heavyweight stocks under pressure in the top flight included BP, which fell 7.5p to 412.5p, and BAE Systems after a decline of 21.5p to 1209.5p.
Diageo struggles continue amid market caution
08:45North America contributed 38% of Diageo’s sales in the first half of its financial year, with about 45% of its products for sale in the US from Mexico and Canada.
Today’s results show that tequila net sales grew 23% in the US, driven by Don Julio. Canadian whisky Crown Royal also performed well after net sales rose 3%.
In Britain, the group’s sales lifted 2% in the half year as it was buoyed by soaring demand for Guinness despite “temporary supply constraints” in recent months.
Shares fell 3% or 79p to 2286p, even though the company said it expected further sales momentum in the second half of its financial year.
Hargreaves Lansdown analyst Derren Nathan said: “For now, tariff headlines will set the mood - but if the trade war ends in more posturing than penalties, Diageo’s world-class brands and global reach could make the current valuation an attractive entry point.”
Interactive Investor head of markets Richard Hunter said developments over the last year have taken the sheen from a stock traditionally regarded as a core portfolio constituent.
He added: “The scale of the challenges ahead is reflected in a share price which has fallen by 20% over the last year, as compared to a gain of 12.7% for the wider FTSE 100, and by 34% over the last two years.
“It therefore follows that until such time as an improvement in customer demand becomes evident and the true impacts of any tariffs can be dealt with, the market consensus of the shares as a hold is likely to remain in place.”
Diageo and Vodafone shares fall, FTSE 100 lower
08:13 , Graeme EvansVodafone shares have opened 5% or 3.6p lower at 66.4p after its third quarter update showed further pressure on revenues in Germany.
Drinks giant Diageo is down 3% or 75p to 2290p, adding to yesterday’s decline of 2.2%, after the company removed mid-term guidance in half-year results.
The FTSE 100 index has fallen by a bigger-than-expected 40.44 points to 8543.12.
Markets steady amid relief over tariffs pause
07:47 , Graeme EvansIG index expects the FTSE 100 index to open 21 points lower at 8562, with Wall Street futures pointing to a mixed session later today.
It said: “Tariff-related volatility has subsided to an extent following news that both Mexico and Canada had managed to delay the imposition of new import costs.
“Both countries seemed able to appease the US president, at least for a month, by promising to strengthen border security.
“This prompted a rebound in embattled risk sentiment, lifting stock indices off their Monday lows. China did retaliate with some tariffs on US products and companies, but investors expect negotiations to begin soon, limiting the negative reaction.”
The Mexican Peso and Canadian Dollar are back close to where they were before the weekend tariff developments.
Vodafone hails UK improvement, sticks to full-year guidance
07:24 , Graeme EvansVodafone has reported a “step-change” in its UK trading after service revenue growth accelerated to 3.3% in the third quarter, from 1.2% previously.
This contributed to overall growth for the period of 5.2% as strong performances in Turkey and Africa were offset by a 6.4% decline in Germany.
During the quarter, Vodafone completed the sale of its Italy division for eight billion euros and received regulatory approval for its merger with Three in the UK.
Chief executive Margherita Della Valle said: “When the UK merger completes in the next few months, we will have fully executed Vodafone’s reshaping for growth.
“We are on track to grow in line with our full year guidance for this year, which we reiterate today, and are looking forward to a stronger Vodafone in the years ahead.”
Diageo removes mid-term guidance amid global uncertainty
07:11 , Graeme EvansDrinks giant Diageo today reported a return to sales growth but warned that US tariffs could impact the company’s “building momentum”.
It has also removed medium-term guidance of 5%-7% net sales growth due to macroeconomic and geopolitical uncertainty in many of its key markets.
Organic net sales increased 1% in the six months to 31 December, reflecting price and mix after a 0.2% volume decline. Reported operating profit declined 4.9%
In North America, Diageo said it outperformed the market driven by the strong performances of Don Julio and Crown Royal. Guinness delivered double-digit growth for an eighth consecutive half.
On tariffs, chief executive Debra Crew said: “Diageo has anticipated and planned for a number of potential scenarios regarding tariffs in recent months.
“The confirmation at the weekend of the implementation of tariffs in the US, whilst anticipated, could very well impact this building momentum.
“It also adds further complexity in our ability to provide updated forward guidance given this is a new and dynamic situation.
“We are taking a number of actions to mitigate the impact and disruption to our business that tariffs may cause, and we will also continue to engage with the US administration on the broader impact that this will have on everyone supporting the US hospitality industry, including consumers, employees, distributors, restaurants, bars and other retail outlets.”
Tariffs in Diageo’s largest market of the US impact its tequila portfolio, which given geographic origin requirements must be made in Mexico, and also Canadian whisky.
Index seen lower, US markets improve after rollercoaster session
07:00 , Graeme EvansUS markets recovered some of their earlier losses last night after Donald Trump announced a month-long pause on Mexico’s 25% tariffs.
The Dow Jones Industrial Average finished 0.3% lower, while the S&P 500 fell 0.8% and the tech-focused Nasdaq Composite lost 1.2%.
London’s blue-chip index dropped 90 points to finish the day at 8583, or a 1% fall, marking its steepest one-day drop of 2025 so far.
Canada tariffs have also been postponed for a month but with China announcing retaliatory action as additional 10% US tariffs come into force today.
IG Index futures show the FTSE 100 index is set to open about 13 points lower, while the pound stands at $1.24 after a rebound yesterday afternoon.
