Diageo Inc. shares are trading lower Wednesday following the company's first-half, fiscal-year 2025 earnings report, which showed a year-over-year decline in financial results. The stock is also under pressure due to concerns over new U.S. tariffs on imported alcohol.

What To Know: The company reported net sales of $10.9 billion for the first half of fiscal 2025, down 0.6% from the previous year, primarily due to unfavorable foreign exchange fluctuations. Organic net sales grew by 1%, driven by price and mix improvements. Operating profit fell 4.9%, and the company's operating profit margin contracted by 132 basis points, impacted by currency headwinds and lower organic operating margins.

Despite these challenges, Diageo ( DEO ) maintained or expanded market share in 65% of measured markets, including the U.S. The company also reported an increase in net cash flow, which rose by $0.2 billion to $2.3 billion, while free cash flow increased to $1.7 billion.

One of the primary concerns weighing on Diageo's ( DEO ) stock is the implementation of U.S. tariffs, which the company acknowledged could disrupt its momentum in the second half of fiscal 2025. While Diageo ( DEO ) had anticipated the possibility of tariffs, their confirmation adds uncertainty to the company's outlook. As a result, Diageo ( DEO ) suspended its medium-term guidance and committed to providing more frequent near-term updates.

CEO Debra Crew noted that the company is taking steps to mitigate the impact but emphasized the broader economic consequences for the hospitality industry.

The tariff concerns, coupled with weaker first-half financial results and an expected decline in organic operating profit for the second half of the fiscal year, have contributed to Diageo's ( DEO ) stock decline. The company's leverage ratio stood at 3.1x net debt to EBITDA as of December 2024 and it declared an interim dividend of 40.5 cents.

DEO Price Action: Diageo ( DEO ) shares closed Wednesday down 3.86% at $111.47, according to Benzinga Pro.

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