4 days ago
Brown-Forman Corp (BF.A) Q4 2025 Earnings Call Highlights: Navigating Challenges with Strategic ...
Reported Net Sales: Decreased 5% in fiscal 2025.
Organic Net Sales Growth: Increased 1% after adjustments.
Woodford Reserve Organic Net Sales Growth: 8% increase.
New Mix Organic Net Sales Growth: Double-digit growth, surpassing 11 million 9-liter cases.
Jack Daniel's Tennessee Whiskey Organic Net Sales Growth: Increased 1%.
Diplomatico Organic Net Sales Growth: Strong double-digit growth.
Gin Mare Organic Net Sales Growth: 1% increase.
Operating Income: Reported decrease of 22%; Organic growth of 3%.
Gross Margin: Contracted by 150 basis points to 58.9%.
Operating Expenses: Lower due to a 6% decrease in organic advertising expense and a 5% decrease in organic SG&A investment.
Diluted Earnings Per Share: Decreased 14% to $1.84.
Annualized Savings from Strategic Initiatives: Approximately $70 million to $80 million.
Cash Received from Duckhorn Sale: $350 million.
Dividends Paid: $420 million in fiscal 2025.
Long-term Notes Repaid: $300 million.
Fiscal 2026 Outlook for Organic Net Sales: Expected low single-digit decline.
Fiscal 2026 Capital Expenditure Outlook: $125 million to $135 million.
Fiscal 2026 Effective Tax Rate: Expected to be 21% to 23%.
Warning! GuruFocus has detected 5 Warning Signs with BF.A.
Release Date: June 05, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Woodford Reserve was the largest driver of organic net sales growth, with an 8% increase driven by higher volume and positive price mix.
New Mix achieved double-digit organic net sales growth, surpassing 11 million 9-liter cases and gaining market share in Mexico.
Jack Daniel's Tennessee Whiskey increased organic net sales by 1%, supported by new media campaigns and sponsorships.
Diplomatico delivered strong double-digit organic net sales growth, particularly in France and Germany.
Brown-Forman's emerging international markets collectively delivered a 9% organic net sales increase, led by Turkey and Brazil.
Reported net sales decreased by 5% in fiscal 2025, with organic net sales growing only 1% after adjustments.
Organic net sales in the travel retail channel declined by 5% due to challenging macroeconomic conditions in Asia.
Developed international markets saw a 3% decline in organic net sales, with notable declines in Italy, South Korea, and the United Kingdom.
Organic net sales for El Jimador and Herradura tequilas declined double-digits due to a competitive environment in the US and economic challenges in Mexico.
Brown-Forman incurred $63 million in charges related to workforce reduction and Cooperage closing, impacting financial results.
Q: Can you explain the discrepancy between the consumer environment for Brown-Forman and other consumer categories like lodging and leisure, which seem to be performing better? A: Lawson Whiting, President and CEO, explained that while some consumer categories are performing well, others are experiencing weaker demand. He noted that the spirits industry faces unique pressures, such as competition from cannabis and changing consumer preferences, which may not affect other sectors as much. Despite these challenges, spirits continue to gain market share from beer and wine, and premiumization remains a positive trend.
Q: What assumptions are included in the fiscal 2026 guidance regarding distributor inventories and consumer demand? A: Leanne Cunningham, CFO, stated that the guidance assumes a continuation of current consumer behavior and trade inventory levels, with no significant changes expected. The guidance also factors in potential disruptions from distributor transitions in the U.S. and a significant reduction in used barrel sales, which are expected to be more than half of fiscal 2025 levels.
Q: How does the fiscal 2026 guidance align with the company's long-term growth algorithm, and has there been any change in the growth outlook? A: Lawson Whiting emphasized that the long-term growth algorithm remains unchanged, with expectations for mid-single-digit growth in the U.S. and higher growth in international markets. However, current market conditions, particularly in the U.S. and Europe, are challenging, and the company is focused on strategic initiatives to drive future growth.
Q: What is Brown-Forman's strategy regarding pricing in the current environment of slowing demand and increased supply in the U.S. whiskey market? A: Lawson Whiting stated that the company aims for low single-digit price increases regularly. Despite concerns about industry supply, the pricing environment has remained rational, with no significant promotional activity or price reductions observed in the market.
Q: How is Brown-Forman addressing potential anti-American sentiment in international markets, and what is the company's approach to advertising and promotion (A&P) spending? A: Lawson Whiting noted that historically, anti-American sentiment has not significantly impacted the Jack Daniel's brand. The company is seeing improvements in brand health measures following recent changes in consumer engagement strategies. Leanne Cunningham added that A&P spending is aligned with depletion-based growth expectations, and the company believes its current investment levels are adequate.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
