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GuruFocus has detected 3 Warning Signs with Brown-Forman Corp $BF.B.
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Brown-Forman Corp (NYSE:BF.B)
Gross Profit
$2,054 Mil (TTM As of Jan. 2017)

Brown-Forman Corp's gross profit for the three months ended in Jan. 2017 was $536 Mil. Brown-Forman Corp's gross profit for the trailing twelve months (TTM) ended in Jan. 2017 was $2,054 Mil.

Gross Margin is calculated as gross profit divided by its revenue. Brown-Forman Corp's gross profit for the three months ended in Jan. 2017 was $536 Mil. Brown-Forman Corp's revenue for the three months ended in Jan. 2017 was $808 Mil. Therefore, Brown-Forman Corp's Gross Margin for the quarter that ended in Jan. 2017 was 66.34%.

Brown-Forman Corp had a gross margin of 66.34% for the quarter that ended in Jan. 2017 => Durable competitive advantage

During the past 13 years, the highest Gross Margin of Brown-Forman Corp was 69.66%. The lowest was 63.56%. And the median was 66.72%.


Definition

Gross Profit is the different between the sale prices and the cost of buying or producing the goods.

Brown-Forman Corp's Gross Profit for the fiscal year that ended in Apr. 2016 is calculated as

Gross Profit (A: Apr. 2016 )=Revenue - Cost of Goods Sold
=3089 - 945
=2,144

Brown-Forman Corp's Gross Profit for the quarter that ended in Jan. 2017 is calculated as

Gross Profit (Q: Jan. 2017 )=Revenue - Cost of Goods Sold
=808 - 272
=536

Brown-Forman Corp Gross Profit for the trailing twelve months (TTM) ended in Jan. 2017 was 513 (Apr. 2016 ) + 453 (Jul. 2016 ) + 552 (Oct. 2016 ) + 536 (Jan. 2017 ) = $2,054 Mil.

Gross Profit is the numerator in the calculation of Gross Margin:

Brown-Forman Corp's Gross Margin for the quarter that ended in Jan. 2017 is calculated as

Gross Margin (Q: Jan. 2017 )=Gross Profit (Q: Jan. 2017 ) / Revenue (Q: Jan. 2017 )
=(Revenue - Cost of Goods Sold) / Revenue
=536 / 808
=66.34 %

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

A positive Gross Profit is only the first step for a company to make a net profit. The gross profit needs to be big enough to also cover related labor, equipment, rental, marketing/advertising, research and development and a lot of other costs in selling the products.


Explanation

Warren Buffett believes that firms with excellent long term economics tend to have consistently higher margins.

Durable competitive advantage creates a high Gross Margin because of the freedom to price in excess of cost. Companies can be categorized by their Gross Margin

1. Greater than 40% = Durable competitive advantage
2. Less than 40% = Competition eroding margins
3. Less than 20% = no sustainable competitive advantage
Consistency of Gross Margin is key

Brown-Forman Corp had a gross margin of 66.34% for the quarter that ended in Jan. 2017 => Durable competitive advantage


Related Terms

Cost of Goods Sold, Gross Margin, Revenue


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

Brown-Forman Corp Annual Data

Apr07Apr08Apr09Apr10Apr11Apr12Apr13Apr14Apr15Apr16
Gross_Profit 1,4811,6951,5771,6111,7241,7951,9552,0782,1832,144

Brown-Forman Corp Quarterly Data

Oct14Jan15Apr15Jul15Oct15Jan16Apr16Jul16Oct16Jan17
Gross_Profit 609553526491586555513453552536
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