European alcohol giant Diageo (DGE), the maker of Guinness beer and Smirnoff vodka, has announced a series of cost cuts as it grapples with the impact of tariffs.
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In announcing its latest quarterly financial results, Diageo said that it plans to cut costs and reduce its debt level as the British beverage giant contends with a $150 million hit caused by U.S. import tariffs. News of the cost cut measures and tariff impacts came as Diageo reported decent financial results.
The company, whose brands also include Johnnie Walker whisky and Captain Morgan rum, reported that its total sales rose nearly 3% to $4.38 billion in its Fiscal third quarter. Diageo generates 45% of its sales in the U.S. and many of its products that are made in Mexico Canada. The company’s tequila brands, for example, are primarily made in Mexico.
Finding Savings
“We view the near-term industry pressure as largely macro-economic driven, with continued uncertainty impacting both the timing and pace of recovery,” said Diageo CEO Debra Crew in the company’s earnings statement.
Management said they plan to save $500 million over three years through various cost cutting initiatives. In the end, the cost reductions should leaves Diageo “well-positioned to deliver sustainable, consistent performance while maximizing shareholder returns,” reads the earnings release.
The stock of Diageo has declined 15% this year.
Is DGE Stock a Buy?
The stock of Diageo, which trades in London, England, has a consensus Moderate Buy rating among 12 Wall Street analysts. That rating is based on nine Buy, two Hold, and one Sell recommendations issued in the last three months. The average DGE price target of $2,505.18p implies 18% upside from current levels. These ratings are likely to change after the company’s financial results.
