Cheers for Diageo as some fizz returns to sales and shares lift 5% in early trade

Dan Coatsworth, head of markets at AJ Bell, said: “Diageo used to flog Guinness with the advertising slogan ‘Good things come to those who wait’.

“Diageo shareholders have been waiting and waiting for the share price to recover after years of pain, but the promise of joy has still not been delivered.

“While there are green shoots of a recovery in its latest trading update, it’s lopsided.

“Europe, Latin America and Caribbean enjoyed decent quarterly growth whereas North America was disappointing.

“That’s troubling because the period included distributors stocking up in North America ahead of the football World Cup.

“Without that boost, the region’s showing could have been truly miserable.

“Diageo has a major problem on its hands with US spirit sales in decline.

“This product line has been central to its growth strategy, with the company long arguing that consumers are happy to pay up for a decent drink.

“The fall in sales would suggest that is no longer the case, or simply that consumers are less able to splash the cash on ‘nice to have’ but non-essential items.

“The hefty drop in North American volumes give management a worse headache than the morning after St Patrick’s Day celebrations.

“It’s unlikely that Diageo will want to slash prices too much to shift more units, as it’s hard to recover from that situation.

“Instead, Diageo will have to revive its marketing machine and come up with a clever way to convince drinkers they need to choose its products.

“Success in Europe should mean that investors aren’t hounding new boss Dave Lewis.

“He needs to take advantage of new-found momentum in the region and get Guinness pouring in pubs and flying off supermarket shelves all day long.

“Guinness is Diageo’s saving grace and provides a steady flow of cash into the business while it sorts out other problems.

“The positive share price reaction is investors breathing a small sigh of relief that at least some of Diageo has regained its mojo.

“Sadly, it remains a long journey to full recovery.”