The Diageo (LSE: DGE) share price has been via the wringer. It has suffered an ideal storm of setbacks, and the most recent uncertainty over commerce tariffs is simply a part of the story. The FTSE 100 spirits big was struggling lengthy earlier than Donald Trump struck.

The difficulty began in November 2023, when Diageo issued a shock revenue warning after a stoop in gross sales throughout its Latin America and Caribbean markets, having overstocked after which having to work down inventories.

The broader international slowdown has additionally tempered demand in key markets such because the US, Europe, China and elements of the rising world.

One main drawback has been customers buying and selling down to cheaper alternate options somewhat than sticking with the premium manufacturers Diageo’s constructed its identify and popularity on. 

The corporate additionally faces the rising problem of adjusting social habits, as youthful generations appear to be consuming lower than their predecessors.

US tariffs have added one other layer of problem. Tequila imports from Mexico and whisky from Canada, two of Diageo’s key product traces, have been among the many first to be hit. Even when a UK-US commerce deal is agreed, the outlook for Mexico and Canada stays unclear.

Newest interim outcomes, revealed on 4 February, highlighted the pressures Diageo’s dealing with. Reported internet gross sales dipped by 0.6% to $10.9bn, regardless of a 1.0% rise in natural internet gross sales, after forex actions took a toll. 

Working revenue fell 4.9% to $3.16bn, with margins slipping to 30.3%. Development in 4 out of 5 areas helped offset a few of the ache, nevertheless it stays a troublesome time to promote booze.

The Diageo share price displays all of this, tumbling 25% over the previous yr, and almost 50% over three.

That’s a brutal decline for a blue-chip inventory that recurrently traded at a hefty premium to the broader market.

Dividend and potential development… someday

Not less than the valuation now seems far more affordable. Diageo shares commerce on a price-to-earnings ratio of 15.8, in step with the FTSE 100 common. The dividend yield stands at a reasonably engaging 3.76%, barely above the index common.

Dangers stay excessive. Commerce tariffs are entrance and centre, however issues about an financial slowdown and longer-term shifts in consuming habits can’t be ignored.  But with the shares buying and selling at a five-year low, regardless of a slight bounce over the past month, I’ve a sneaking feeling this might mark the underside. Analysts appear cautiously optimistic too.

The 22 professionals masking the inventory have set a median 12-month goal of two,434p. From as we speak’s 2,108p, that might suggest a achieve of greater than 15%. After every thing Diageo’s been via, that might symbolize a good restoration. I’m at the moment down 25%, so that might nonetheless depart me within the purple. 

I’ve already backed Diageo closely and I gained’t be shopping for extra. Even when the restoration story performs out, I count on it’ll be a rocky street. 

Nonetheless, the temper across the inventory is so gloomy proper now that this may very well be a traditional ‘darkest before the dawn’ second. Lengthy-term buyers would possibly take into account shopping for it as we speak, however first they need to take into account the dangers.