Whisper it… but is the great Diageo share price recovery back on?

I should probably keep my mouth shut because I don’t want to jinx it, but the Diageo (LSE: DGE) share price is finally showing signs of life.

The FTSE 100 drinks giant’s shares have plunged 56% over the last five years, a calamitous performance from what was once seen as one of Britain’s most impressive blue-chip stocks. And it seemed to come out of nowhere. Sales suddenly slumped in Latin America and the Caribbean, then the weakness spread to bigger markets including the US and China, as inflation surged and the cost-of-living crisis went global. Inventory issues didn’t help.

It got worse. US tariffs hit Mexican tequila and Canadian whisky, Gen Z proved either too skint or too sober to drink like previous generations, while GLP-1 weight loss drugs also hit the appetite for alcohol among users.

Why has this FTSE 100 stock slumped?

My table goes some way to explaining why the shares have performed so badly. As sales stalled and full-year operating profits slipped, Diageo’s net debt suddenly looked far more worrying too. Especially with its market cap sliding below $50bn.

I kept averaging down as the shares got cheaper and the dividend yield crept towards 5%. I bought even more after Sir Dave Lewis was named chief executive, taking charge in January. He masterminded a brilliant turnaround at Tesco and I hoped he’d do the same here.

But I’d forgotten an important lesson. Lewis began his Tesco tenure by throwing every scrap of bad news at investors, and it took around 18 months before the stock really started to recover. He kicked off by slashing Diageo’s dividend in half. The shares fell further. Then further still. Until now.

Like I said, I don’t want to make too much of this, but the Diageo share price has suddenly climbed 12.5% over the last month. We’ve had the odd false dawn before. Even so, I can’t help feeling a little more optimistic. With the price-to-earnings a modest 13.5, there could be further to go.

I’ve noticed a broader rally in consumer-facing shares across my portfolio, which I find slightly baffling given persistent inflation worries. There’s been the odd bout of profit-taking, but overall the mood feels brighter.

Can Diageo shares keep fizzing along?

Some investors may be positioning themselves ahead of Diageo’s full-year results on 6 August, which will include a strategy update. Perhaps they’re hoping for early signs that Lewis is working his magic.

I still think there’ll be plenty of bumps along the way. Consumers are being squeezed and Lewis has a huge job on his hands. His proposed push into ready-to-drink canned cocktails looks like small beer against the scale of the challenge. Then there’s that debt mountain.

But sentiment finally feels as though it’s shifting in the right direction. Investors might consider buying today, in the hope that the recovery will gather pace. But I won’t make too much noise about it. Just in case.

Should you invest £5,000 in Diageo Plc right now?

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Harvey Jones owns shares in Diageo.