The Securities and Exchange Commission is investigating whether
Diageo PLC has been shipping excess inventory to distributors in an
effort to boost the liquor company's results, according to people
familiar with the inquiry.
By sending more cases to distributors than wanted, the
British-based owner of Smirnoff and Johnnie Walker would be able to
report increased sales and shipments, according to these
people.
Diageo on Thursday confirmed to The Wall Street Journal that it
received an inquiry from the SEC regarding its distribution in the
U.S.
"Diageo is working to respond fully to the SEC's requests for
information in this matter," a company spokeswoman said.
The inquiry coincides with a period of tumult in Diageo's
executive ranks. Diageo announced in June that North American
President Larry Schwartz would be retiring by the end of the year.
Since then, the company also has announced the departures of its
chief marketing officer for North America and a president of
national accounts in the U.S.
It recently named Deirdre Mahlan, currently chief financial
officer, as president of Diageo North America.
The North American region is the largest and most important to
Diageo's bottom line. It accounts for about a third of its $17.58
billion in sales and around 45% of operating profit. Volumes
decreased 1% last year, but price increases helped sales rise 3% to
about $5.34 billion.
Write to Tripp Mickle at Tripp.Mickle@wsj.com and Saabira
Chaudhuri at saabira.chaudhuri@wsj.com
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