Brown Forman Inc. (NYSE:BF) (NYSE:BF), the parent of Jack Daniel’s whiskey, Old Foster and other popular brands, saw its stock drop Thursday after it reported a weaker-than-expected first-quarter fiscal 2025.
The Louisville-based distiller reported first-quarter earnings per share of 36 cents, missing the analyst consensus estimate of 37 cents.
Quarterly sales of $924 million (down 3% year over year) outpaced the Street view of $914.464 million.
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The decline in net sales was driven by the absence of the prior-year transition services agreement (TSA) related to Sonoma‑Cutrer.
Net sales growth in emerging markets and the travel retail channel was offset by declines in the U.S. and developed international markets.
Sales of Brown-Forman’s core whiskey portfolio were flat, with new product launches providing only partial support. Strong shipments of Jack Daniel’s Tennessee Blackberry ahead of its debut and steady growth of Tennessee Apple in Brazil helped balance softer demand for Jack Daniel’s Tennessee Whiskey in the U.S. and Germany.
The tequila segment slipped 1% (+1% organic), while ready-to-drink beverages posted a 6% gain (+9% organic).
By geography, U.S. sales fell 8% (-2% organic) and developed international markets dropped 8% (-9% organic). Emerging markets grew 20% (+25% organic), while travel retail sales climbed 8% (+7% organic).
Gross margin expanded by 40 basis points, helped by the positive impact of divestitures. However, this was partially reduced by higher costs, unfavorable price/mix, and foreign exchange headwinds.
Quarterly operating income decreased 7% to $260 million (+2% on an organic basis).
Operating margin declined 140 basis points to 28.2%, mainly due to foreign exchange headwinds, the absence of a prior-year franchise tax refund, and the effects of the restructuring initiative.
“Our solid first-quarter performance reflects the decisive actions we’ve taken to strengthen our business in a challenging environment,” said Lawson Whiting, Brown‑Forman’s president and CEO. “Superior innovation and bold route-to-consumer strategies, in particular, have positioned us to deliver resilient results in the face of persistent headwinds. We are pleased to reaffirm our full-year outlook and remain confident in our ability to create long-term value for shareholders.”
Outlook
The company reaffirmed its fiscal 2026 outlook, expecting organic net sales and organic operating income to decline in the low-single-digit range.
It anticipates an effective tax rate of around 21% to 23%. Planned capital expenditures are projected between $125 million and $135 million.
The company also acknowledged the near-term outlook remains uncertain. Brown-Forman said it continues to anticipate a challenging operating environment for fiscal 2026, citing macroeconomic and geopolitical volatility, consumer uncertainty, the risk of new tariffs, and lower non-branded sales of used barrels.
Even so, management emphasized its focus on long-term growth, pointing to ongoing U.S. distribution changes, a restructuring initiative, and a slate of new product innovation as key drivers it expects will unlock future growth opportunities.
Price Action: BF.B shares are trading lower by 5.58% to $28.75 at last check Thursday.
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