Brown-Forman (BF-B) Tops Q2 EPS by 7c, Offers FY Guidance

Brown-Forman Reports First Half Results; Reaffirms Full Year Earnings Per Share Outlook for Fiscal 2020

December 5, 2019 7:51 AM EST

LOUISVILLE, Ky.--(BUSINESS WIRE)-- Brown-Forman Corporation (NYSE: BFA) (NYSE: BFB) reported financial results for its second quarter and first half of fiscal 2020. For the second quarter, the companys reported net sales1 were up 9% to $989 million (+6% on an underlying basis2) compared to the same prior-year period. In the quarter, reported operating income increased 6% to $352 million (-3% on an underlying basis) and diluted earnings per share rose 14% to $0.59.

For the first six months of the fiscal year, the companys reported net sales increased 5% to $1.8 billion (+3% on an underlying basis). Reported net sales benefited approximately 1% due to the net change in distributor inventories related largely to the launch of Jack Daniels Tennessee Apple. Year-to-date reported operating income increased 1% to $600 million (-5% on an underlying basis) and diluted earnings per share increased 5% to $0.97.

Lawson Whiting, the companys President and Chief Executive Officer, said, As expected, our results improved during the second quarter. We continue to deliver solid underlying growth from both a geographic and portfolio perspective, despite the uncertain global economic and geopolitical environment. Today, we reaffirmed our underlying net sales outlook for the year and remain on track to deliver another year of mid-single digit growth in underlying net sales led by the Jack Daniels family of brands, including the launch of Jack Daniels Tennessee Apple in the United States, as well as sustained double-digit growth from our premium bourbon and tequila portfolios.

Whiting further added, We continue to build our business for the long-term. Our takeaway trends3 remain healthy in many major markets as we continue to invest in consumer momentum by absorbing most tariff-related costs. We believe this, coupled with increased investments in advertising and route-to-consumer changes in certain markets, position us well for the next generation of growth.

Year-to-Date Fiscal 2020 Highlights

Underlying net sales grew 3% (+5% reported), improving to 6% (+9% reported) in 2Q: The United States grew underlying net sales 6% (+10% reported), emerging markets grew underlying net sales 5% (+4% reported), and our developed international markets grew underlying net sales 2% (+1% reported) Jack Daniels family of brands underlying net sales grew 2% (+5% reported) bolstered by the October launch of Jack Daniels Tennessee Apple in the United States, partially offset by a 1% underlying net sales decline (+1% reported) of Jack Daniels Tennessee Whiskey, which is largely timing related The companys premium bourbons grew underlying net sales 22% (+28% reported) driven by Woodford Reserves 20% underlying net sales growth (+25% reported) and even stronger rate of growth from Old Forester Our tequila portfolio grew underlying net sales 11% (+10% reported), led by Herraduras 19% underlying net sales growth (+21% reported) and el Jimadors 13% underlying net sales growth (+8% reported) Diluted earnings per share increased 5% to $0.97

Year-to-Date Fiscal 2020 Results By Market - Net Sales Growth Led by the United States

The United States grew underlying net sales 6% (+10% reported) driven by sustained double-digit growth from our premium bourbons, Woodford Reserve and Old Forester, and double-digit underlying net sales gains in aggregate from our tequilas, Herradura and el Jimador. Underlying net sales growth for the Jack Daniels family of brands accelerated to mid-single digits for the first half of fiscal 2020 driven by the launch of Jack Daniels Tennessee Apple and double-digit growth of Jack Daniels RTDs3.

Underlying net sales in the companys emerging markets grew 5% (+4% reported) on top of last years double-digit underlying net sales growth. Russias 22% increase in underlying net sales (+27% reported) reflected higher volumes of Jack Daniels Tennessee Whiskey and Finlandia due in part to favorable comparisons to the late fiscal 2018 route-to-consumer change as well as strong consumer demand for both brands. Despite the ongoing macroeconomic slowdown, Mexico grew underlying net sales 4% (+2% reported), fueled largely by pricing gains and volume growth for Herradura. Brazils underlying net sales grew 7% (+16% reported) on top of the prior years strong performance driven by growing demand for Jack Daniels Tennessee Whiskey and Jack Daniels Tennessee Fire. Polands underlying net sales declined 4% (-7% reported) largely driven by lower volumes and net prices for Finlandia.

Developed international markets increased underlying net sales 2% (+1% reported). In the United Kingdom, underlying net sales declined 1% (-2% reported) due to lower volumes in one channel and unfavorable mix for Jack Daniels Tennessee Whiskey compared to the same period last year. Germanys underlying net sales were flat (+2% reported) as lower volumes of Jack Daniels Tennessee Whiskey, due in part to timing associated with order patterns of certain customers in the same period last year, were offset by the continued volume growth of Jack Daniels RTDs. France grew underlying net sales 3% (+4% reported) led by volume gains for Jack Daniels Tennessee Honey and the launch of Jack Daniels RTDs. Australias underlying net sales grew 2% (flat reported) led by higher prices and increased volumes of Jack Daniels Tennessee Whiskey, while Spain grew reported and underlying net sales in the high-single digits driven by the Jack Daniels family of brands.

Travel Retails underlying net sales declined 8% (-9% reported) driven primarily by lower volumes for the Jack Daniels family of brands largely due to the phasing of customer orders in the same period last year.

Year-to-Date Fiscal 2020 Results By Brand

Jack Daniels family of brands underlying net sales increased 2% (+5% reported) as growth was propelled by the launch of Jack Daniels Tennessee Apple in the United States and broad-based growth for Jack Daniels RTDs and Jack Daniels Tennessee Honey. Jack Daniels Tennessee Whiskey experienced a 1% decline in underlying net sales (+1% reported) due to lower volumes in certain developed international markets and Travel Retail, which offset volume growth in emerging markets led by Russia and China. Jack Daniels RTDs delivered volumetric gains producing underlying net sales growth of 7% (+6% reported). Jack Daniels Tennessee Honey grew underlying net sales 7% (+3% reported) with volume growth led by France, the United States, and Poland.

Brown-Formans portfolio of premium bourbon brands, including Woodford Reserve and Old Forester, continued their strong double-digit underlying net sales growth of 22% (+28% reported). Woodford Reserve, the leader in the super-premium bourbon category, grew underlying net sales 20% (+25% reported) fueled by the United States, where volumetric growth was supported by expanding consumer demand. Old Forester sustained an even faster rate of underlying net sales growth powered by volumetric gains and favorable mix.

The companys tequila brands sustained double-digit underlying net sales growth led by Herradura 19% (+21% reported) and el Jimador 13% (+8% reported). Herraduras underlying net sales growth was driven by higher volumes and pricing in the United States and Mexico. el Jimadors underlying net sales growth was driven by higher volumes in the United States, as consumer takeaway trends remain strong, higher pricing in Mexico, and volume growth and higher pricing in a number of other international markets.

Finlandia vodkas underlying net sales declined 7% (-8% reported) as lower volumes and prices in Poland were partially offset by volume gains in... More