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I’ve suffered a proper previous beating by the hands of this FTSE share, however for the primary time in ages I’m abruptly feeling a bit chipper about it. After years of ache, spirits large Diageo (LSE: DGE) has lastly served up a shot of unadulterated optimism.
The Diageo share worth had been down greater than 50% over three years and 26% within the final 12 months. It’s been a protracted fall from grace for what was as soon as one of many most secure FTSE 100 blue-chips of all. However it’s up 7.5% as I write Monday (10 November) lunchtime.
After the board minimize full-year steerage final Thursday, I requested on these pages whether or not it was game-over for the Diageo share worth. Natural internet gross sales at the moment are anticipated to be flat or barely decrease in 2026, with working revenue development restricted to low-to-mid-single digits.
Interim chief govt Nik Jhangiani tried to reassure the market with speak of price self-discipline, effectivity plans, and early wins in Europe, however with no everlasting CEO, traders had been unconvinced. That’s now modified.
Diageo underneath new management
The kicker is immediately’s information that former Tesco chief govt Dave Lewis has been made everlasting CEO from 1 January 2026. I’ve adopted Lewis intently since he revived Tesco in 2014, cleansing up after Philip Clarke’s failed tenure. Earlier than that, he was at Unilever for 30 years.
At Tesco, Lewis talked to workers, prospects and suppliers, then rolled up his sleeves and stuck the basics at velocity. He’s keen to take agency motion, being dubbed ‘Drastic Dave’ for slashing prices at Tesco. That’s the kind of management Diageo wants proper now. He was knighted within the New 12 months’s Honours Record in 2020 for companies to the grocery commerce.
After leaving Tesco in 2020, he took on the chair of FTSE 100 firm Haleon in 2022, serving to set up it as an impartial listed enterprise. Diageo describes him as a “confirmed chief govt with in depth advertising and marketing and brand-building expertise”, and the market’s already reacted, lifting the share worth 7% on the announcement of his appointment. As I suspected it will the second I noticed the information.
FTSE 100 alternative
One man can’t resolve each drawback. Diageo faces two main structural threats as younger folks drink much less, and the rise of appetite-suppressing weight-loss medicine may hit alcohol consumption too. These challenges are already mirrored within the shares, with the price-to-earnings ratio all the way down to round simply 13.8 immediately.
The corporate additionally wants an finish to the cost-of-living disaster, and for the US to keep away from recession, to place cash in folks’s pockets and allow them to begin having enjoyable once more. Lewis should handle stocking points, drive price financial savings, encourage workers and redirect technique, however he has a confirmed monitor report at these items.
Lengthy-term potential
I’m cautiously optimistic. There’s nonetheless loads of room for development, each in rising markets and in premium spirits, and the appropriate CEO may unlock it. There’s additionally a useful 4.3% trailing dividend yield. Traders would possibly think about shopping for it immediately, however solely with a long-term view.
The turnaround gained’t occur in a single day, however with Lewis on the helm, and a good wind, the restoration may now be on.
