Diageo's first quarter (Q1) results were "a miss" for one analyst, while another claimed its performance was "muted" for the three months to September 30.
The global brewer and distiller grew organic net sales by 3.1%, below the Shore Capital estimate of 4% and short of Diageo's 6% medium-term annual growth target.
"We believe the market was also expecting growth to be 4% so the performance has come in behind its expectations," said Shore Capital analyst Phil Carroll.
Investec analyst Martin Deboo said: "Q1 sales have missed on the top line, by the order of one percentage point, relative to an already muted expectation."
Weak emerging markets
The results were driven by weak emerging markets, he said, "consistent with our sell thesis that emerging markets are set to make life difficult for Diageo for a while".
However, despite these struggles, "the irony of the Q1 – mirroring trends elsewhere – is that developed markets came in slightly ahead of expectations", said Deboo.
And Carroll acknowledged: "The sales decline in Western Europe was not as bad as expected but the company does caution that it expects the full year performance to be below that of Q1 …"
Restocking of brands in France had boosted performance in the region, according to Diageo, which is well-known for brands such as Baileys and Guinness.
Failing to achieve growth
Organic net sales fell by 1.1% in Western Europe, the only one of its five main regions failing to achieve growth. Overall sales volumes rose by just 0.6% during the quarter.
Diageo reported the greatest organic net sales growth over the period from Latin America and Caribbean, which rose by 10.9%. The North America business also continued to deliver good growth.
"Our business in Western Europe performed in line with the slightly improving trends we saw in Q4 of F13 [the last full year], although I still expect a low single digit net sales decline for the full year," said Diageo ceo Ivan Menezes.
"While there are headwinds in some emerging markets … there are also markets in which we continue to deliver robust growth and Diageo's strength is the diversity of our geographic breadth and broad category reach."
