Diageo feels the pain as slump hits sales

Booze giant Diageo today admitted a sobering slump in sales during the first three months of the year as the downturn put drinkers off their tipple.

Core sales for the Guinness stout, Smirnoff vodka and Johnnie Walker whisky maker fell by 7% in the period, thanks in part to its drinks distributors in the US cutting back on stock.

The company also said its global travel division is suffering as fewer people fly, while its Russian arm has been particularly hard hit by consumers trading down to cheaper spirits.

"Trading around the world has weakened in the second half of the fiscal year," said chief executive Paul Walsh. But he added that, thanks to marketing and cost-cutting drives, the group should emerge from the recession stronger.

Diageo said it remains on track to deliver profit growth of between 4% and 6% for the year to the end of June - a figure it cut from 7-9% in February as trading conditions deteriorated.

However the company is benefiting from sterling's weakness and a lower tax bill, meaning growth in reported earnings per share will still be in double digits.