Dive Brief:
- Brown-Forman Corp. reported a 3% decline in second-quarter sales to $830 million and a 4% decrease for the first six months of the year, according to the company's earnings report. The company attributed the declines to currency headwinds and the divestiture of Southern Comfort and Tuaca last fiscal year.
- Reported operating income for the quarter dipped 4% to $291 million, while diluted EPS saw a 3% uptick to $0.50 per share, for a total quarterly profit of $197 million.
- Brown-Forman cut its forecast for adjusted sales to between 4% and 5% growth this fiscal year, which meant dropping the top end of its forecast by 1%. The company also lowered its expectations for adjusted operating income to 6% to 8% growth, compared to previous estimates of 7% to 9%.
Dive Insight:
Brown-Forman may have lowered its expectations for the fiscal year, but the company's underlying sales, excluding the impact of the divestitures and currency headwinds, demonstrate a different side of this earnings report.
Underlying net sales for the second fiscal quarter increased by 3%, and by 2% for the year to date. While reported year-to-date net sales in the U.S. and emerging markets were -1% and -13%, respectively, underlying sales for the same time period were up 5% for the U.S. and down only 1% in emerging markets. Mexico and Poland, the company's two largest emerging markets, posted double-digit adjusted sales growth, but sales declines in other markets, such as Turkey, Russia, Brazil and China, offset those gains.
Jack Daniel's, one of Brown-Forman's flagship brands, reported underlying year-to-date sales growth of 2%, though reported net sales came in at a 1% decline. But among the strongest brand growth the company has posted so far this fiscal year were from super- and ultra-premium North American whiskey brands, including 19% underlying sales growth from Woodford Reserve (+12% reported). That growth is in line with strong sales increases posted by the whiskey/bourbon category in recent years, particularly among the premium varieties.
Alongside whiskey growth, the tequila category is also a promising one for Brown-Forman. The Herradura tequila brand posted 16% underlying year-to-date sales growth (+12% reported), and El Jimador saw a 9% increase (+3% reported). Between a surging Hispanic population and growing interest in Hispanic foods and beverages, tequila, particularly premium brands, has also enjoyed sales growth.