sales have been affected negatively since the first quarter of
fiscal 2014 by the unfavorable foreign exchange translation. The
trend has continued in the third quarter reported recently. On
Apr 17, 2014 Diageo reported interim management statement for the
third quarter of fiscal 2014 ended Mar 31, 2014. Organic net
sales (i.e. total revenue minus excise duties) declined 1.3%.
Volume slipped 1.0% from the year-ago period due to unfavorable
currency translations and lower consumer confidence resulting
from the ongoing macroeconomic headwinds.
Diageo's reportable segments are North America, Western
Europe, Africa, Eastern Europe and Turkey, Latin America and the
Caribbean and Asia Pacific region.
During the third quarter, emerging markets witnessed soft
top-line results due to weak consumer confidence resulting from
the continuing unfavorable currency translations. However,
results in the developed markets were in line with the first half
of the year.
, Diageo's organic sales went up 1.2% in the third quarter as the
region benefited partially from some restocking.
, organic sales climbed 1.2% backed by strong business of the
reserve brands. However, growth rate was slower than the previous
quarter as organic sales growth was very high in the comparable
quarter of the previous year.
Africa, Eastern Europe and Turkey
, organic sales declined 5.2% during the period due to slowdown
in South Africa, which offset the growth in Turkey, Nigeria and
Russia. In Kenya, the Senator Keg brand witnessed slow sales.
Latin America and Caribbean
delivered strong performance in the quarter, with organic sales
growth of 27.7% backed by robust performance in Brazil. However,
results were partly offset by weakness in Mexico and
region, sales slid 19.0% organically due to negative impact from
the political instability in Thailand and weaker performance in
Chinese white spirits in the last three months.
The company is increasing marketing investment in all the
geographical segments, with greater focus on the premium brands.
The strategy of transitioning to high-margin high-priced products
is improving the company's margins.
London-based Diageo, owns brands such as Johnnie Walker,
Smirnoff and Guinness and has been exploring opportunities to
expand geographically through acquisitions. The Zacks Rank #3
(Hold) stock has acquired companies with strong indigenous
presence like Mey Içki in Turkey, ShuiJingFang in China and
Halico in Vietnam in fiscal 2012.
Other stocks in the consumer staples sector worth considering
McCormick & Company, Incorporated
Mondelez International Inc.
). All the stocks carry a Zacks Rank #2 (Buy).
DIAGEO PLC-ADR (DEO): Free Stock Analysis
MONDELEZ INTL (MDLZ): Free Stock Analysis
MCCORMICK & CO (MKC): Free Stock Analysis
SUPERVALU INC (SVU): Free Stock Analysis
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