Release Date: December 05, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Brown-Forman Corp (BF.A, Financial) reaffirmed its full-year organic net sales and organic operating income outlook for fiscal 2025, indicating confidence in its financial performance.
- Woodford Reserve, Diplomatico Rum, and Old Forester were the largest contributors to organic net sales growth, showcasing strong brand performance.
- Jack Daniel's Tennessee Whiskey saw significant acceleration in organic net sales, indicating a recovery in its performance.
- The company is actively expanding its geographic reach and product offerings, such as the launch of Jack Daniel's RTDs in new markets like India.
- Brown-Forman Corp (BF.A) has been proactive in preparing for potential tariff impacts, implementing risk mitigation strategies to protect its global portfolio.
Negative Points
- Reported net sales decreased by 5% in the first half of fiscal 2025, indicating challenges in maintaining sales momentum.
- Tequila brands El Jimador and Herradura faced challenges in their largest markets, the US and Mexico, due to increased competition and economic conditions.
- Organic gross profit decreased by 8%, resulting in a 240 basis point contraction in gross margin, highlighting cost pressures.
- The company is operating in a highly dynamic environment with many uncertainties, including potential tariff impacts and geopolitical conditions.
- Brown-Forman Corp (BF.A) noted that the US market is experiencing muted consumer demand, impacting overall sales performance.
Q & A Highlights
Q: Can you provide an update on inventory levels, particularly in the U.S., and how distributors and retailers are approaching the holiday season?
A: Leanne Cunningham, CFO: Distributors are targeting the low end of their normal range, and retailers have adjusted inventory levels due to lower consumer takeaway trends and the interest rate environment. Shipments for key brands like Jack Daniel's Tennessee Whiskey have increased to meet holiday demand. We don't anticipate significant changes in trade inventory levels, and globally, inventory levels are similar to the end of Q1.
Q: Could you explain the divergence between U.S. consumer takeaway trends and your reported whiskey depletions?
A: Lawson Whiting, CEO: The divergence isn't significant; we're running around minus three percent, which aligns with our organic basis and consumer takeaway. The U.S. market is rolling about minus two percent off-premise and minus three percent on-premise. Our guidance includes a full-year benefit from Jean-Marie and Diplomatico, continued growth in Japan, and Jack Daniel's Tennessee Whiskey growth outside the U.S.
Q: Can you elaborate on the potential impact of tariffs on your business and the mitigation strategies in place?
A: Lawson Whiting, CEO: We're preparing for various scenarios regarding tariffs, including potential retaliatory tariffs from Europe and new tariffs on imports from Mexico and Canada. We've learned from past experiences and have implemented risk mitigation strategies globally. However, there are many unknowns, and it's difficult to predict the outcome.
Q: What measures are you taking to revitalize Jack Daniel's Tennessee Whiskey in the U.S., and what are the brand health indicators suggesting?
A: Lawson Whiting, CEO: We're focusing on recruiting new legal drinking age consumers through initiatives like McLaren racing sponsorships and music events. We're also leveraging media campaigns and the Jack and Coke RTD product. Brand health metrics like penetration and consumer perceptions are starting to improve, indicating positive trends.
Q: How significant was the contribution of used barrel sales and the return of shipments to Japan to your growth, and what drove the increase in used barrel sales?
A: Leanne Cunningham, CFO: Used barrel sales contributed significantly to growth, driven by supply and demand dynamics and customer mix. The return of shipments to Japan was a unique growth driver, and we've been successful in establishing our business there post-distribution transition.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
