LEXINGTON, Ky. _ Investors in Brown-Forman, parent of Jack Daniel's Tennessee Whiskey, may need a stiff drink _ the Louisville-based company reported Wednesday that net sales fell 5 percent to $661 million for the first quarter.
Some of the heartburn came from double-digit declines in U.S. sales of Tennessee Fire.
For the quarter, diluted net earnings fell to $144 million, or 36 cents a share, down 2 percent per diluted share, compared to $156 million or 37 cents per diluted share for the same period last year.
Despite the dip, the company still expects to deliver earnings of $1.71 to $1.81 in fiscal 2017, according to chief financial officer Jane Morreau.
The company attributed 2 percentage points of the drop to adverse foreign exchange rates and 3 percentage points to the loss of sales from Southern Comfort and Tuaca, brands that were sold earlier this year to Sazerac.
Taking those factors into account, Brown-Forman said underlying net sales were up 2 percent.
"Our first quarter reported results came in largely as anticipated considering the absence of previously disposed brands and the difficult comparisons against last year's launch of Jack Daniel's Tennessee Fire in the United States," said CEO Paul Varga in a news release.
"While our results continue to be hampered by the combined effects of adverse foreign exchange and challenging emerging market conditions, we still expect fiscal 2017 to be another year of solid underlying sales and operating income growth, driven by the Jack Daniel's family of brands, as well as our portfolio of premium bourbons and tequilas."
Underlying sales of the Jack Daniel's brands were up 3 percent, with Tennessee Honey's underlying sales up 5 percent, the company said. However, Jack Daniel's Tennessee Fire, introduced a year ago, suffered double-digit declines in the U.S. The Tennessee Fire declines were partially offset by the rollout outside the U.S.
Sales of premium bourbon Woodford Reserve were up a reported 19 percent, with 24 percent underlying growth; premium tequila Herradura was up a reported 16 percent, or 18 percent underlying growth, and El Jimador was up a reported 9 percent, or 10 percent underlying growth.
Sales in the U.S. were down 3 percent, although up 5 percent on an underlying basis, with growth from Woodford Reserve, Old Forester, the introduction of Cooper's Craft, the tequilas, Sonoma-Cutrer wines and most of the Jack Daniel's family.
In a conference call to discuss the results, company officials said part of the decline was due to the comparison against a very strong launch a year ago of Jack Daniel's Tennessee Fire. While the sales direct to consumers has slowed, Varga said, on-premise sales _ drinking in bars _ is growing. He said Tennessee Fire also will be expanding into more countries, which should give the brand a boost.
Emerging markets, which account for 20 percent of the company's sales, were a more mixed bag and did not stabilize as expected, driving reported sales down 17 percent, Brown-Forman said.
The slowdown in emerging markets began in the last half of the previous fiscal year and some countries, including Russia, they believe the sales decline is bottoming out, Morreau said.
Other factors that could have an impact on the rest of the year include the rollout of the Jack Daniel's 150-year anniversary celebration, which will include commemorative releases that should generate increased sales, and the decline in the Scotch whisky market, which has slowed demand for Brown-Forman's used bourbon barrels significantly.
