Diageo shares surge as new CEO unveils $1bn savings plan
Shares in Diageo jumped 10% in trading immediately after CEO Dave Lewis presented a $1bn savings plan, signalling early investor confidence in his restructuring strategy. The plan, described by Lewis as a "significant" restructuring, promises $1bn of savings over two years and is aimed at making the company more agile.
Lewis, who joined Diageo in January, has been tasked with reviving the spirits maker after a lacklustre period under his predecessor, Debra Crew. The appointment was announced last November following a period of underperformance, which included a shock profits warning and strategic missteps during Crew's tenure. Diageo's share price had jumped when Lewis's appointment was announced, but fell in February after he slashed the dividend and reported weak demand in the US and China.
The savings plan comes as Diageo reported a 2% decline in net sales to $19.6bn (£14.6bn) for the year to the end of June 2026. Operating profit fell by 27% to $3.16bn, including one-off charges related to the restructuring and write-downs of brands such as Don Papa rum. The dividend will be kept at its reduced level of $0.50 per share.
Job cuts and restructuring details
As part of the restructuring, Diageo's total headcount fell more than 6% year-on-year by the end of June, according to its annual report. The company reported an average of 27,938 employees on a full-time equivalent basis, excluding staff of associates and joint ventures, down from 29,860 in the previous year. Most of the reductions across its regional markets are expected to be completed by September 1.
Lewis, nicknamed "Drastic Dave" for his history of cost-cutting at Tesco and Unilever, has said the changes in headcount were focused on global back-office functions and areas of "massive duplication". In July, Reuters reported that some Diageo teams were cutting around 20% to 30% of their staff as part of deep reductions in overhead.
The two-year restructuring programme, which is already underway, is expected to cost $1.2bn, with the $1bn in annual savings coming from the overhaul. Diageo declined to comment on Reuters' request seeking details about the job cuts.
Expansion plans
Beyond cost savings, Diageo intends to lower prices on some brands and expand in fast-growing categories, including Guinness and canned cocktails. This dual approach of cutting costs while investing in growth areas is central to Lewis's strategy to improve the company's fortunes.
Perspectives
Diageo
The company, through CEO Dave Lewis, asserts that the restructuring is necessary to make the business more agile and achieve significant savings. Lewis acknowledges the "very significant impact" on colleagues but frames the changes as focused on eliminating duplication in back-office functions, while also investing in high-growth categories like Guinness and canned cocktails.