Diageo plans to cut costs, sell assets, maintain Guinness brand to reduce debt

From Yahoo Finance: 2025-05-19 02:26:00

Diageo plans to cut $500 million in costs and sell assets by 2028 to improve performance and reduce debt. The cost cuts will come from changes to trade investment, advertising, overheads, and supply chain. The company aims to reduce its leverage ratio and maintain the Guinness brand.

CEO Debra Crew confirmed that the well-performing Guinness brand will not be sold. The cost cuts are expected to help Diageo generate $3 billion in free cash flow per year starting in 2026. The company also lowered its expected impact from U.S. tariffs due to decreased threats on imports from Mexico and Canada.

The plan does not involve large-scale job cuts but may include changes to headcount through slower hiring. New finance chief Nik Jhangiani aims to implement substantial changes beyond small brand disposals. Investors welcomed the plans, although Diageo’s stock was down 0.7% after the announcement.

Diageo investor, RBC Brewin Dolphin, noted that turning around a company of Diageo’s size takes time. The company still faces challenges in key markets like the U.S. and Europe. President Trump’s 10% tariff on imports from the UK and EU will impact Diageo’s operating profit by an estimated $150 million per year.

Diageo estimated a lower tariff impact of $150 million annually, down from the previous $200 million estimate due to no 25% levy on Mexican tequila and Canadian whisky. The company’s plan includes reducing costs, selling assets, and maintaining the Guinness brand to improve performance and reduce debt.

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