Guinness purveyor looks 'better placed than most to weather the storm'
Diageo, which sells Johnnie Walker and Guinness, has announced a 'solid performance' in its half year results.
In the year up to December 31, organic net sales, excluding the effect of acquisitions and currency moves, grew 9.4% due to volume growth of 1.8% and higher prices.
Organic operating profit grew 9.7%, with margins modestly higher.
Charlie Huggins, Head of Equities at Wealth Club, said: “This is a solid performance from Diageo, underlining the strength and diversity of its brand portfolio.
"While not immune from economic headwinds and inflationary pressures, Diageo looks better placed than most to weather the storm.
"It is much easier to raise prices on a bottle of Johnnie Walker than on a bottle of shampoo or deodorant.
"So Diageo ought to have more pricing power than most consumer goods peers. This is a key reason for its resilient margins.
If the economy hits the rocks, Diageo may see some downtrading to less expensive brands. But it’s unlikely consumers will cut back significantly on alcohol. And long-term premiumisation trends are unlikely to abate.
"Overall, Diageo is demonstrating why it is considered a high quality long-term compounder. While short-term blips can’t be ruled out, investors who abide by the famous Guinness slogan – Good things come to those who wait – could be rewarded.”
