FTSE 100 winners: Diageo resumes recovery, Next upgrades again
There’s fresh buying of this alcoholic drinks giant trading near a 14-year low, while a high street fashion chain goes from strength to strength. City writer Graeme Evans explains.
6th May 2026 13:34
by Graeme Evans from interactive investor
The Guinness Harp seen in London. Credit: Mike Kemp/In Pictures via Getty Images.
Sales progress at Diageo (LSE:DGE) and a small beat on lofty expectations at Next (LSE:NXT) were met with relief today as the pair’s shares extended their run from post-war lows to 14% and 8% respectively.
Guinness and Johnnie Walker owner Diageo made the most headway in today’s strong FTSE 100 session after it reported third-quarter organic sales growth of 0.3%, much better than City forecasts for a 2.3% decline.
- Our Services: SIPP Account | Stocks & Shares ISA | See all Investment Accounts
The performance followed growth in Europe, Latin America and Africa, offset by a 9.4% decline in North America amid ongoing challenges in the US spirits market.
Easter phasing and shipments ahead of the World Cup in North America are thought to have offered a two-percentage point boost to the result.
Given that these factors will unwind in the current quarter, Diageo reaffirmed its full-year guidance for an annual organic sales decline of between 2% and 3% and operating profit growth between flat and a low-single digit higher.
The full-year results on 6 August will include an update on Diageo’s strategy under new CEO Dave Lewis, whose initiatives are likely to include a greater push towards canned cocktails in the ready-to-drink category.
He has also highlighted the need for a more competitive offer in the US, where third-quarter organic sales fell 15.4% amid tough comparatives with last year’s pre-tariffs activity.
Lewis has already rebased the dividend as part of moves to bolster the balance sheet, meaning shareholders can expect an interim payout of 20 US cents a share on 4 June compared with the 40.5 cents in 2025.
- FTSE 100 ex-dividend dates: May 2026
- How this dividend hero delivers a market-beating yield
- Stockwatch: why ‘Sell in May’ could genuinely apply this year
Shares were 1,874p prior to February’s annual results before a further setback due to the Middle East war left them at a fresh multi-year low of 1,362.5p on 24 March. They were 1,550.5p after today’s update, still 28% lower over the past year.
Bank of America said the shares now traded at a multiple of 12.7 times 12‑month forward earnings, which it regards as attractive based on a 24% discount to EU staples.
The bank, which has a price target of 1,920p, said: “The US remains a key headwind, with limited visibility on the timing and pace of a recovery, but performance elsewhere in the group is solid. We see further upside from accelerated deleveraging.”
Despite the uncertain geopolitical environment, Next maintained its recent run of profit upgrades by forecasting a surplus of £1.22 billion for the year to next January.
The £8 million increase to guidance followed full-price sales growth of 6.2% in the first quarter to 2 May, well ahead of the company's original 4% estimate after an “exceptionally strong” start to the period saw growth of 11.8%.
The impact of the Middle East conflict on international sales meant the figure reversed 0.2% in weeks 6-8 of the quarter before a recovery to 5.3% in the final five weeks of the period.
UK sales growth slowed from 8.6% at the start to 1.7% by the end, partly as Next lapped last year’s favourable weather and start of trading disruption at cyber-hit Marks & Spencer Group (LSE:MKS).
The 6.2% full-price sales growth came in ahead of the City consensus of 5.4%, while most analysts had expected the retailer to reiterate full-year guidance.
- Why BT shares just surged to six-year high
- Sign up to our free newsletter for investment ideas, latest news and award-winning analysis
- 10 hottest ISA shares, funds and trusts: week ended 1 May 2026
From a cost perspective, Next’s guidance now embeds increased fuel and supply chain headwinds from the Iran conflict throughout the remainder of the year. However, it expects to offset the pressures through cost efficiencies and price rises in the Middle East.
Based on its current estimates, Next does not anticipate increasing its UK prices over and above the 0.6% that it had forecast at the beginning of the year.
Shares rose 320p to 12,945p, which compared with 14,430p after the company’s strong Christmas trading update and the six-month low of 12,000p set in late March.
Shore Capital, which has a price target of 15,000p, said Next deserved its premium rating of 15.6 times 2026 earnings. This compares with their recent 17-18x range.
The City firm said: “Next has once again demonstrated the strength and resilience of the business.
“When we couple the ongoing sales and profit progression with the high shareholder returns (via both a forecast £340 million in dividends and £510 million in buybacks, a total yield of 5.5%) we continue to see upside to the shares.”
These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.
Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.