Tough markets put the strain on Diageo

ALCOHOLIC drinks giant Diageo will this week brace itself for an investor backlash over fears for its short term growth outlook.

Diageo, the maker of Guinness and Smirnoff vodka, is widely expected to announced figures in line with its expectations, with pre-tax profit climbing from £2.02bn last year to around £2.3bn.

But the group’s share price is likely to suffer as the continued headache of unemployment in its key markets impacts sales figures and reduces confidence in its ability to grow during a period of economic turmoil.

In North America, where Diageo reaps around 40 per cent of its business, consumers have been increasingly moving away from mainstream brands in an attempt to cut costs as unemployment remains high.

“Given that Diageo is so exposed to markets with weak macro conditions, and foreign exchange has begun to move against it, we can only rationalise that if the stock has become a hiding place, [it will be] dangerous going into results,” said analysts at Collins Stewart.