Drastic Dave strikes: Diageo shares sink as it slashes dividend
Shares in Diageo are down over 5 per cent as it slashed its dividend and predicted a further slump in sales. It is the first update from Dave Lewis at the helm of the FTSE 100 firm, which also owns whisky brand Johnnie Walker and Smirnoff vodka.The former Tesco boss - who was nicknamed Drastic Dave after his cost-cutting at the supermarket - stepped into the job in January after the dramatic exit of his predecessor Debra Crew last year.He has been tasked with a tough turnaround mission as the drinks giant battles to reverse a slump in demand as more drinkers opt to cut down or abandon alcohol.But in his seventh week in the job, Lewis said he expects sales to fall 2-3 per cent in the 2026 financial year - blaming a weak consumer in the US. Guinness maker Diageo has struggled with falling sales for its spirits brands, especially in the USShares tumbled 5.5 per cent to 1,771p following the update, which Lewis described as 'mixed' but analysts dubbed 'awful'.The group announced an interim dividend of 20 US cents, down from 40.5 US cents a year earlier. It said it is committed to growing shareholder distributions, with a minimum floor set for the dividend of 50 US cents each year.Lewis said: ‘We are confident that this is the right action which will ensure that Diageo can reinforce its position as the leading international spirits business and drive stronger shareholder value over the coming years.’The group saw sales for the six months to December 31 fall 4 per cent to £7.7bn.It said demand for its drinks in the US was hit by ‘pressure on disposable income, and competitive pressure from more affordable alternatives addressing a more stretched consumer wallet.’Lewis said there was ‘significant work ahead’ to turn the business around.He said he can ‘already see significant opportunities for Diageo to act more decisively to enhance its competitiveness and broaden the portfolio offering leading to higher growth.’He said his turnaround would focus on ‘customer, customer, customer’ and initial analysis has shown that ‘a very significant squeeze on disposable income.’ 'I don't want the Diageo business to be something that has to rely on the economic temperature in order to be successful,' Lewis told analysts. 'That's going to be the change in the strategy you see going forward.'He also pledged ‘to design a much more agile Diageo operating framework’ following reports that he would push ahead with changes including stripping out entire layers of management.The business is seen to have become ‘fat and happy’ and have complicated decision-making processes, the Financial Times reported last week.And he said there was scope for the business to be more innovative when it came to growing categories including ‘ready to drink’ products.There is a ‘very significant and profitable opportunity’, Lewis said, especially as Diageo had ‘created this category with the launch of Smirnoff Ice circa 26 years ago.'It comes amid fierce competition from new ‘ready to drink’ products, especially those offering a high percentage of alcohol, including BuzzBallz.Shares have soared this year since Lewis was announced as the new boss- but they are still down by around 37pc over the past five years.Dan Coatsworth, head of markets at AJ Bell, said: ‘There is no point trying to dress up the six-month figures. These are awful results, and the repair job is massive.‘Lewis must like a spectacular challenge, as it was clear from the day he was offered the job that it wouldn’t be easy. Fixing Diageo is like turning around an oil tanker – a very slow process.’AJ BellAJ BellEasy investing and ready-made portfoliosHargreaves LansdownHargreaves LansdownFree fund dealing and investment ideasinteractive investorinteractive investorFlat-fee investing from £4.99 per monthFreetradeFreetradeInvesting Isa now free on basic planTrading 212Trading 212Free share dealing and no account feeAffiliate links: If you take out a product This is Money may earn a commission. These deals are chosen by our editorial team, as we think they are worth highlighting. This does not affect our editorial independence.Compare the best investing account for you
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Drastic Dave strikes: Diageo shares sink as it slashes dividend
