Brown-Forman (BF-B) Misses Q4 EPS by 1c

Brown-Forman Reports Fiscal 2020 Results

June 9, 2020 8:00 AM EDT

LOUISVILLE, Ky.--(BUSINESS WIRE)-- Brown-Forman Corporation (NYSE: BFA, BFB) reported financial results for its fourth quarter and fiscal year ended April 30, 2020. For the fourth quarter, the companys reported net sales1 declined 5% to $709 million (-10% on an underlying basis2) compared to the same prior-year period. Reported operating income decreased 18% to $187 million (-27% on an underlying basis) and diluted earnings per share declined 20% to $0.27.

For the full year, the companys reported net sales increased 1% to $3.4 billion (flat on an underlying basis). Reported operating income decreased 5% to $1.1 billion (-6% on an underlying basis) and diluted earnings per share declined 1% to $1.72.

First, I speak on behalf of the entire Brown-Forman family in saying that our hearts and thoughts are with all who have been so deeply affected by COVID-19. While this is a business challenge, it is, above all, a human tragedy. I would like to thank our 4,800 employees for their exceptional agility and creativity in quickly shifting and adapting to the recent events in such a short period of time, said Lawson Whiting, President and Chief Executive Officer. He added, Brown-Forman has endured and prevailed through many challenges over the last 150 years. We believe we are well positioned to successfully navigate the environment we face today and emerge stronger thanks to the continued support of our shareholders, including the Brown family, our healthy balance sheet, the resilience of our people, and the strength of our brands.

Fiscal 2020 Highlights

Underlying net sales were flat (+1% reported) in a year marked by significant disruption The United States, our largest market, grew underlying net sales 5% (+8% reported), while our developed international and emerging markets each declined 1% (-2% and -4% reported, respectively) Jack Daniels family of brands underlying net sales were flat (+1% reported). Underlying net sales growth from Jack Daniels Tennessee Apple, Jack Daniels RTDs3, and Jack Daniels Tennessee Honey was offset by declines in Jack Daniels Tennessee Whiskey Premium bourbons grew underlying net sales 21% (+24% reported) led by Woodford Reserves 19% underlying net sales growth (+23% reported) and supported by even stronger underlying growth from Old Forester, the companys founding brand, which is celebrating its 150th year Our tequila portfolio grew underlying net sales 2% (+5% reported) as high single-digit growth in the U.S. was partially offset by declines in Mexico. Herradura grew underlying net sales 7% (+11% reported) and el Jimador grew underlying net sales 5% (+8% reported), while underlying net sales for New Mix declined. Non-branded and bulk underlying net sales declined 29% (-30% reported) primarily reflecting lower used barrel demand and pricing along with a reduction in bulk whiskey sales Brown-Forman generated an ROIC3of 20%

Business Environment Update Amid COVID-19 Pandemic

The company completed its third quarter of the fiscal year on January 31, 2020, registering a year-to-date net sales increase of 3% on both a reported and underlying basis with underlying net sales trends holding through February. In early March, the company revised its full-year outlook to include an estimate for the impact of COVID-19 on its results from Asia, most notably China, and Travel Retail only. Subsequent to that time, the rapid spread of the virus resulted in all of the companys major markets being negatively affected.

COVID-19 began to affect our performance in the middle of March and continued throughout April as both on-premise, representing approximately 20% of our business globally, and Travel Retail channels essentially came to a halt. We experienced strong growth in the off-premise (based on syndicated takeaway data) and e-Premise channels across most of our developed markets as country lockdowns and government restrictions took hold reflecting both an increase in at-home consumption and some pantry loading, said Jane Morreau, the companys Executive Vice President and Chief Financial Officer.

Fiscal 2020 Results By Market

Underlying net sales growth in the United States accelerated in fiscal 2020, increasing 5% (+8% reported), fueled in part by the fall 2019 launch of Jack Daniels Tennessee Apple, despite slower growth in the fourth quarter as COVID-19 related impacts began to take effect. Double-digit underlying net sales growth for Woodford Reserve, Old Forester, Jack Daniels RTDs, Herradura, and el Jimador collectively, also contributed to the growth for the year.

Underlying net sales in the companys emerging markets fell 1% (-4% reported) as mid-single digit underlying net sales growth through the third quarter of fiscal 2020 was more than offset by significant declines in the fourth quarter. In Mexico, the companys largest emerging market, underlying and reported net sales declined 7% as the recessionary economy was further hindered by the effects of the health pandemic. Despite COVID-19 headwinds, Polands underlying net sales grew 2% (-1% reported) in fiscal 2020 driven by higher volumes for the Jack Daniels family of brands, and Russia delivered strong underlying net sales growth of 8% (+6% reported) led by volume gains for Jack Daniels Tennessee Whiskey supported by strong consumer demand.

The developed international markets underlying net sales declined 1% (-2% reported) with the pandemic negatively affecting fourth quarter performance across these markets. In the United Kingdom, the companys largest international market, underlying net sales declined 8% (-10% reported) driven by unfavorable channel and size mix and short-term disruptions from changes to our promotional strategy. Australia and Frances underlying net sales each declined 1% (-5% and -1% reported, respectively). In Australia, lower volumes of Jack Daniels RTDs and Jack Daniels Tennessee Whiskey were only partially offset by volumetric growth from the super-premium American whiskey portfolio. Declines in France were driven by lower volumes for Jack Daniels Tennessee Whiskey, offsetting volume growth from Jack Daniels Tennessee Honey and the launch of Jack Daniels RTDs. Despite the challenging environment in the final weeks of the fiscal year, Germanys underlying net sales grew 7% (+8% reported) fueled by volume growth for Jack Daniels RTDs.

Travel Retails3 underlying net sales declined 10% (-11% reported) largely reflecting the unprecedented implementation of travel bans and restrictions caused by the pandemic.

Fiscal 2020 Results By Brand

The companys whiskey portfolio grew underlying net sales +2% (+3% reported). Jack Daniels family of brands underlying net sales were flat (+1% reported). Jack Daniels Tennessee Whiskeys underlying net sales decline offset growth from Jack Daniels Tennessee Apple, Jack Daniels RTDs, and broad-based volume growth from Jack Daniels Tennessee Honey and Gentleman Jack.

Brown-Formans portfolio of premium bourbon brands, including Woodford Reserve and Old Forester, continued to grow underlying net sales double digits. Woodford Reserve, the leader in the super-premium American whiskey category, grew underlying net sales 19% (+23% reported) and surpassed the one million 9L case milestone in fiscal 2020. Woodford Reserves growth was led by the United States, where consumer takeaway trends remain strong, along with broad-based volume growth internationally. Old Forester, the companys 150-year-old founding brand, provided even stronger underlying net sales growth powered by volumetric gains and favorable mix from the brands high-end expressions.

Brown-Formans tequila brands grew underlying net sales 2% (+5%... More