Brown-Forman Corporation reports first quarter results with 6% net sales increase

USA – Brown-Forman Corporation, one of the largest American-owned companies in the spirits and wine business, has reported its first quarter financial results with 6% net sales increase, ended July 31, 2018.

According to the company, its net sales increased 6% to US$766 million (+9% on an underlying basis) compared to the same prior-year period in the first quarter.

In the quarter, reported operating income increased 7% to US$264 million (+10% on an underlying basis) and diluted earnings per share grew 12% to US$0.41.

The company also reported that it delivered solid, broad-based growth around the world, with the strongest results coming from markets outside of the United States.

It estimated that an increase in retail and wholesale inventory levels, largely related to tariffs, contributed approximately two to three points of underlying net sales growth to company-wide top-line results.

The United States grew underlying net sales +2% (0% reported), against last year’s 5% comparison.

According to syndicated data, Brown-Forman’s value based takeaway trends remain consistently in the mid-single digits rate of growth.

The Jack Daniel’s family of brands excluding Tennessee Whiskey grew underlying net sales high-single digits, with gains from Tennessee Honey, Tennessee Fire, and RTDs/RTP (RTDs3), as well as the continued launch of Jack Daniel’s Tennessee Rye.

The company’s premium bourbons continued to grow rapidly in the United States, including strong double-digit underlying net sales gains from Woodford Reserve and Old Forester.

Herradura and el Jimador tequila grew aggregate underlying net sales in the mid-teens.

Underlying net sales in the company’s developed markets outside of the United States were very strong, up 16% (+12% reported).

Results in the European Union benefited from easy comparisons versus the same year ago period and the timing of orders as our trade partners worked to navigate an uncertain period given recently enacted tariffs.

Germany and the United Kingdom grew underlying net sales by 38% (+28% reported) and 33% (+19% reported), respectively, while France’s underlying net sales increased 3% (-1% reported).

Spain continued to grow well into the double-digits on the heels of last year’s transition to owned distribution in that market.

Australia’s underlying net sales increased 6% (+2% reported) and Canada’s underlying net sales were flat (-2% reported).

Emerging markets continued to strengthen on a two-year basis despite increasingly difficult comparisons, with underlying net sales growth of 11% (+7% reported).

Mexico grew underlying net sales by 5% (-6% reported), fueled by strong growth across the portfolio of RTDs as well as American whiskey.

Poland delivered underlying net sales growth of 4% (+8% reported) as strength in whiskey was offset somewhat by soft results for Finlandia as the company begins to transition to new packaging for the brand.

Brazil grew underlying net sales 30% (+20% reported) due to strong demand for Jack Daniel’s Tennessee Whiskey.

Russia experienced a 12% decline (+57% reported) due to challenging comparisons related to the changes in distributor and related buying patterns.

Most other emerging markets, such as Turkey, China, Romania, India, and Ukraine delivered underlying net sales well into the double-digits in the quarter.

Travel Retail delivered solid growth in the quarter, with underlying net sales up 22% (+24% reported).

The company’s premium American whiskey brands, including the Jack Daniel’s family of brands and Woodford Reserve, enjoyed strong consumer demand, and Travel Retail benefited from new product launches, higher passenger volumes, and timing related to trade buying.

“Brown-Forman’s business momentum continued during the first quarter of fiscal 2019, with strong net sales growth as consumer demand for our premium American whiskey brands remained robust.

After considering the estimated impact of order phasing related to tariffs, our first quarter growth was in-line with last year’s underlying net sales growth and keeps us on track to deliver another strong year of top-line growth in the 6-7% range,” said Paul Varga, the company’s Chief Executive Officer.

“There remains significant uncertainty around the duration of recently enacted tariffs, but we have been encouraged by the resilience of our business model as we are working to minimize short-term disruption and maintain our top-line momentum.

We believe that our consistent reinvestment back into our brands and people positions us well over the long term to continue generating leading returns for our shareholders,” added Lawson Whiting, the company’s Chief Operating Officer and incoming CEO.

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