Virus to Cut Diageo Drink Sales by as Much as $420 Million

(Bloomberg) --

Diageo Plc said the coronavirus will reduce its sales by as much as 325 million pounds ($422 million) this year after bars and restaurants were shut in large parts of China, reducing demand for alcoholic drinks.

• Organic net sales will be cut by 225 million to 325 million pounds for the current financial year, with organic operating profit reduced by 140 million to 200 million pounds, the company said, the Johnnie Walker whisky maker said.

Key Insights

• The distiller joins other drinks companies, including Pernod Ricard SA and Remy Cointreau SA, in reporting a hit to sales from the virus.
• Diageo’s announcement shows how efforts to curb the outbreak, including quarantine measures in China, are having a chilling effect on consumption in a key market.
• As the virus spreads, sales in places like South Korea and Japan are also being affected, Diageo said.
• The company said it’s hard to estimate the duration of the downturn, though it expects an improvement later in the financial year.

Market Reaction

• Diageo shares have been virtually flat over the past 12 months.

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