- Brown-Forman has offered early retirement to about 150 salaried employees, dozens of whom receive six-figure salaries, the Courier-Journal said. The paper reported that the company, with a workforce of 4,700, hasn't had a large reduction in its workforce since 2009 when 250 employees were laid off.
- Separately, Brown-Forman posted fourth quarter earnings of $110 million compared to $144 million in the same period a year earlier. Sales rose to $733 million from $694 million, trailing Wall Street forecasts of $755 million. The company said Q4 income and earnings per share were "negatively impacted" by the creation of a $70 million charitable foundation, as well as the phasing of operating expenses.
- The Kentucky company also said the global economy and conditions in emerging markets are improving. But it cautioned that a competitive landscape and "concerns over potential retaliatory tariffs on American spirits ... make it difficult to accurately predict future results."
Brown-Forman continues to benefit from strong demand for spirits, with its Jack Daniel's and super-premium American whiskey brands posting sales increases during the quarter of 6% and 15%, respectively. Every one of the company’s top ten markets posted a rise in net sales, with the U.S. — responsible for nearly half of its sales — growing 7%.
Consumers have largely turned away from beer toward wine and spirits, placing companies such as Diageo and Brown-Forman in position to take advantage of this. Brown-Forman, which makes Finlandia vodka and Woodford Reserve and Old Forester bourbons, posted a sharp increase in sales during the quarter and noted improving conditions around the world that could help stoke more demand. Assuming current trends continue, Brown-Forman forecast underlying net sales to increase between 6% and 7%, and for underlying operating income to rise between 7% and 9% during its 2019 fiscal year.
But despite the positive outlook, the company warned of an uncertain future, some of it outside of its control. Brown-Forman recently reorganized top managers and said its longtime CEO Paul Varga will be replaced by current COO Lawson Whiting at the end of the year. In addition, executives warned of growing competition in developed markets responsible for the lion's share of its sales. It's possible Brown-Forman's decision to offer early retirement to 150 well-paid employees could help offset some of these challenges.
Its biggest obstacle could be the looming impact of the tariff war, which has become a concern of a few food companies in recent weeks. Campbell Soup warned of double-digit increases on steel and aluminum after the White House imposed a 25% tariff on steel and 10% tariff on aluminum.
For Brown-Forman, the blowback comes as Mexico imposed a 25% tariff on bourbon imports earlier this month, with the E.U. and Canada saying they would place duties on American products, including whisky, in retaliation to the tariffs. While Mexico, for example, is only responsible for 5% of the company's sales, it has grown 15% during the last year. Losing sales to Mexico would starve Brown-Forman of a key growth driver.
There is probably little that Brown-Forman can do on its own, but it's possible the company could seek to recover lost sales through price increases. The global challenges also could make a merger with Constellation Brands or another alcohol company more enticing. Constellation Brands, whose products include Svedka Vodka and Corona, reportedly tried to acquire Brown-Forman last spring. One saving grace for Brown-Forman is that it is making products that consumers continue to enjoy, and few brands enjoy recognition as widespread as Jack Daniels' popularity.