BNPP Exane View While Q1 LFL sales (flat vs. co. cons. -1.3%) is a modest beat, Diageo has cut its FY26 guidance at both the top- and bottom-line driven by the adverse impact from Chinese white spirits and a weaker US consumer environment than originally planned for (including increased competitive pressure in US spirits, particularly in tequila). While there had been some expectation of a trim to the FY26 LFL sales guide, we think guidance for flat to slightly negative LFL sales is a bit worse than expected. While we expect a negative share price reaction, given valuation and the weakness of the shares YTD we expect it to be fairly modest today (c.-1-2%). Q126 headline metrics . LFL sales: 0.0% (co. cons: -1.3%; BBG cons. -1.2%) . LFL vol: +2.9% (co. cons. -0.9%) Top-line drivers Scanning the Q126 top-line drivers by region we note that all regions contributed to the Q126 LFL sales beat (0.0% vs. co. cons. -1.3%) apart from Asia Pacific which came in narrowly below consensus expectations (-7.5% vs. co. cons. -6.7%). By region, the beat was led by Latin America and Caribbean (+10.9% vs. co. cons. +5.9%) and Europe (+3.5% vs. co. cons. +0.5%) in particular, while the North America (-2.7% vs. co. cons. -3.5%) and Africa (+8.9% vs. co. cons. +8.1%) regions also came in modestly ahead of consensus expectations. Overall group volumes grew by +2.9% (vs. co. cons. -0.9%), led by strong volume growth in Africa (+10.7%), LAC (+6.7%) and Asia Pacific (+5.2%), while North America (-2.1%) and Europe (-1.9%) were in decline. The stronger group volume growth was partially offset by negative price/mix (-2.8%), driven by Asia Pacific (price/mix -12.8%). Bottom-line drivers N/A - only a sales update. Other metrics . US spirits: While Diageo had planned for a cautious US consumer environment, the overall spirits market was softer than expected, with increased competitive pressure, particularly in tequila. US spirits Q126 LFL sales declined -4.1% (no comment is...