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Diageo PLC (NYSE:DEO)
Gross Margin
57.72% (As of Jun. 2014)

Gross Margin is calculated as gross profit divided by its revenue. Diageo PLC's gross profit for the six months ended in Jun. 2014 was $4,225 Mil. Diageo PLC's revenue for the six months ended in Jun. 2014 was $7,320 Mil. Therefore, Diageo PLC's Gross Margin for the quarter that ended in Jun. 2014 was 57.72%.

DEO' s 10-Year Gross Margin Range
Min: 28.59   Max: 62.43
Current: 60.72

28.59
62.43

During the past 13 years, the highest Gross Margin of Diageo PLC was 62.43%. The lowest was 28.59%. And the median was 59.77%.

DEO's Gross Marginis ranked lower than
100% of the Companies
in the Global Beverages - Wineries & Distilleries industry.

( Industry Median: vs. DEO: 60.72 )

Diageo PLC had a gross margin of 57.72% for the quarter that ended in Jun. 2014 => Durable competitive advantage

The 3-Year average Growth Rate of Gross Margin for Diageo PLC was 1.10% per year.


Definition

Gross Margin is the percentage of Gross Profit out of sales or Revenue.

Diageo PLC's Gross Margin for the fiscal year that ended in Jun. 2014 is calculated as

Gross Margin (A: Jun. 2014 )=Gross Profit (A: Jun. 2014 ) / Revenue (A: Jun. 2014 )
=10539.8 / 17357.0219966
=(Revenue - Cost of Goods Sold) / Revenue
=(17357.0219966 - 6817.25888325) / 17357.0219966
=60.72 %

Diageo PLC's Gross Margin for the quarter that ended in Jun. 2014 is calculated as

Gross Margin (Q: Jun. 2014 )=Gross Profit (Q: Jun. 2014 ) / Revenue (Q: Jun. 2014 )
=4225 / 7319.79695431
=(Revenue - Cost of Goods Sold) / Revenue
=(7319.79695431 - 3094.75465313) / 7319.79695431
=57.72 %

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

A positive Gross Profit is only the first step for a company to make a net profit. The gross profit needs to be big enough to also cover related labor, equipment, rental, marketing/advertising, research and development and a lot of other costs in selling the products.


Explanation

Warren Buffett believes that firms with excellent long term economics tend to have consistently higher margins.

Durable competitive advantage creates a high Gross Margin because of the freedom to price in excess of cost. Companies can be categorized by their Gross Margin

1. Greater than 40% = Durable competitive advantage
2. Less than 40% = Competition eroding margins
3. Less than 20% = no sustainable competitive advantage
Consistency of Gross Margin is key

Diageo PLC had a gross margin of 57.72% for the quarter that ended in Jun. 2014 => Durable competitive advantage


Be Aware

If a company loses its competitive advantages, usually its gross margin declines well before its sales declines. Watching Gross Margin and Operating Margin closely helps avoid value trap situations.


Related Terms

Operating Margin, Cost of Goods Sold, Gross Profit, Revenue


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

Diageo PLC Annual Data

Jun05Jun06Jun07Jun08Jun09Jun10Jun11Jun12Jun13Jun14
Gross Margin 60.5859.7759.8559.8958.1958.0959.6460.4360.9360.72

Diageo PLC Semi-Annual Data

Dec09Jun10Dec10Jun11Dec11Jun12Dec12Jun13Dec13Jun14
Gross Margin 59.2356.7961.0558.0261.9858.6462.3359.3762.9157.72
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