Diageo withdraws medium-term goals as tariffs cloud outlook

Adds shares in paragraph 2, CFO comment in paragraph 3, analyst in paragraph 13

By Yadarisa Shabong and Emma Rumney

Feb 4 (Reuters) - Diageo DGE.L withdrew its medium-term organic sales growth target on Tuesday as the world's top spirits maker took steps to try and mitigate the impact of U.S. tariffs on its tequila and Canadian whisky.

Shares of the maker of Johnnie Walker whisky and Don Julio tequila dropped 2.5% in early trade, hitting their lowest since Nov. 6 and making them one of the biggest losers on London's FTSE 100 on Tuesday.

New finance chief Nik Jhangiani told journalists he expected a gross impact of around $200 million on the company's operating profit for the current financial year, mostly from tequila, if tariffs are implemented from March 1.

The company said it scrapped its medium-term organic net sales growth of 5% to 7% because macroeconomic and geopolitical uncertainty were hurting the pace of its recovery.

CEO Debra Crew said tariffs in the U.S. announced over the weekend added to "further complexity in our ability to provide updated forward guidance".

Over the weekend U.S. President Donald Trump imposed tariffs on China, Canada and Mexico, although on Monday he agreed a 30-day pause on the tariffs on Canada and Mexico. China hit back on Tuesday with tariffs of its own on some U.S. goods.

Diageo said there were a number of possible actions it could take to help mitigate the impact of tariffs including pricing, inventory management, re-allocation of investments and supply chain optimisation.

"We will ... continue to engage with the U.S. administration on the broader impact that this will have on ...consumers, employees, distributors, restaurants, bars and other retail outlets," Crew said in a statement.

The company said its tequila made in Mexico and exported into the United States would be the most hit by U.S. tariffs. It would also see a hit on its Canadian whisky that it exports to the U.S.

The impending tariffs would be on the input cost, not the retail price, Diageo added.

Diageo said its organic sales grew 1% in July-December 2024, beating a 0.4% increase expected by analysts in a company-compiled poll.

Investors had expected finance chief Jhangiani, who took office in September, to row back the company's medium-term sales target given falling sales across the alcoholic beverages sector.

"We welcome the removal of the medium-term guidance ... In our view this resulted in unrealistic expectations on the part of investors and sub-optimal management decisions designed to support an unfeasible growth aspiration," analysts at RBC Capital Markets said in a note.

Consumers have remained cautious and the macroeconomic recovery is taking longer than expected, particularly in North America and China, Diageo said.