Brown-Forman (BF-A) Reports Q1 EPS of $0.67

Brown-Forman Reports Solid First Quarter Results amidst Continued Uncertainty

September 2, 2020 7:45 AM EDT

LOUISVILLE, Ky.--(BUSINESS WIRE)-- Brown-Forman Corporation (NYSE: BFA) (NYSE: BFB) announced financial results for its first quarter of fiscal 2021 with reported net sales1 down 2% to $753 million (+3% on an underlying basis2) compared to the same prior-year period. Further, reported operating income increased 56% to $387 million (+15% on an underlying basis) and diluted earnings per share grew 73% to $0.67.

I am very pleased with our performance at the start of this fiscal year and thankful to our 4,800 employees worldwide who made these results possible, said Lawson Whiting, President and Chief Executive Officer. He added, Despite being faced with significant ongoing challenges, our business performed well during the quarter though much uncertainty remains in the current environment. We believe we are well positioned to navigate the headwinds we face today and emerge from the COVID-19 environment in a stronger position.

First Quarter of Fiscal 2021 Highlights

Underlying net sales grew 3% (-2% reported) The United States and developed international markets grew underlying net sales 9% (+3% reported) and 12% (+13% reported), respectively, while underlying net sales in emerging markets declined 3% (-20% reported) Jack Daniels family of brands underlying net sales grew 3% (-2% reported). Underlying net sales growth from Jack Daniels RTDs3, Jack Daniels Tennessee Apple, Jack Daniels Tennessee Honey, and Gentleman Jack was partially offset by an unfavorable channel mix shift in Jack Daniels Tennessee Whiskey Premium bourbons grew underlying net sales 18% (+15% reported) driven by Woodford Reserves 14% underlying net sales growth (+11% reported) and sustained high double-digit underlying net sales growth from Old Forester The tequila portfolio grew underlying net sales 16% (flat reported) led by strong volume-driven underlying net sales growth from New Mix in Mexico and double-digit underlying net sales growth from el Jimador. Herraduras underlying net sales declined 16% (-25% reported) as double-digit growth in the United States was more than offset by declines in Mexico Non-branded and bulk underlying net sales declined 32% (-31% reported) primarily reflecting lower demand and pricing for used barrels

First Quarter of Fiscal 2021 Brand Results

The Jack Daniels family of brands provided positive underlying net sales growth driven by Jack Daniels RTDs, the ongoing launch of Jack Daniels Tennessee Apple, and broad-based volume growth from Jack Daniels Tennessee Honey. Gentleman Jack contributed volumetric gains in the United States partially offset by unfavorable channel mix. Underlying net sales declines for Jack Daniels Tennessee Whiskey were driven by lower volumes in emerging markets and Travel Retail reflecting travel bans and other restrictions related to COVID-19, along with unfavorable channel mix in the United States and developed international markets due to significant restrictions in the on-premise channel.

Brown-Formans portfolio of premium bourbon brands, including Woodford Reserve and Old Forester, maintained their double-digit underlying net sales growth. Woodford Reserves gains were driven by volumetric growth in the United States, partially offset by volume declines in Travel Retail. Old Foresters strong double-digit underlying net sales growth was powered by ongoing volumetric gains and favorable mix from the brands high-end expressions.

The companys tequila brands provided strong underlying net sales growth led by higher volumes of New Mix supported by increased consumer demand in Mexico. el Jimadors underlying net sales were fueled by higher volumes and pricing in the United States and Mexico, while Herraduras underlying net sales decline was driven by lower volumes and unfavorable mix in Mexico, partially offset by higher prices, favorable product mix, and higher volumes in the United States.

First Quarter of Fiscal 2021 Market Results

From a geographic perspective, underlying net sales growth in the United States and our developed international markets was partially offset by declines in Travel Retail, used barrels, and emerging markets.

In the United States, underlying net sales growth was driven by:

expanding consumer demand for Jack Daniels RTDs, including the launch of new spirits-based RTDs premium bourbons, led by Woodford Reserve and Old Forester the ongoing launch of Jack Daniels Tennessee Apple and Jack Daniels Tennessee Honey

This growth was partially offset by declines in Jack Daniels Tennessee Whiskey reflecting an unfavorable channel mix shift from the on-premise business due to COVID-19 related restrictions and closures in this channel.

Underlying net sales growth in our developed international markets was fueled by Jack Daniels RTDs, the launch of Jack Daniels Tennessee Apple in a number of countries, and Jack Daniels Tennessee Honey.

Broad-based declines registered in the companys emerging markets were led by Russia, Southeast Asia, sub-Saharan Africa, and India, as COVID-19 driven challenges adversely impacted first quarter results. Partially offsetting these declines were underlying net sales growth in Mexico, Brazil, and Poland.

Underlying net sales results in Travel Retail continued to be significantly impacted by COVID-19 reflecting the unprecedented continuation of travel bans and other restrictions.

First Quarter of Fiscal 2021 Other P&L Items

Volumes grew 22% in the first quarter driven by New Mix, the Jack Daniels family of brands, and Woodford Reserve. Company-wide price/mix decreased 19% reflecting unfavorable portfolio mix with growth from lower-priced brands (New Mix & Jack Daniels RTDs) and unfavorable channel mix resulting from COVID-19 related restrictions in the on-premise channel.

Underlying gross profit declined 1% (-7% reported) and reported gross margin contracted 320 basis points to 61.7% driven by higher input costs and unfavorable mix primarily reflecting COVID-19 related closures in the on-premise channel and the significant increase in sales of ready-to-drink products.

The companys investment in underlying advertising declined 34% (-33% reported) reflecting the phasing of spending, a reduction in on-premise activations, and the cancellation of consumer events and sponsorships given the current environment. The company expects advertising investments to accelerate over the balance of the fiscal year. Underlying SG&A declined 10% (-10% reported) driven by lower discretionary spend as the company maintained its cost discipline focus.

Underlying operating income increased 15% (+56% reported) driven primarily by operating expense leverage.

Diluted earnings per share increased 73% to $0.67 including an estimated $0.19 per share gain from the sale of the Canadian Mist, Early Times, and Collingwood brands and $0.08 per share benefit related to a discrete tax item recognized in the quarter.

Financial Stewardship

On July 23, 2020, the Brown-Forman Board of Directors declared a regular quarterly cash dividend of $0.1743 per share on the Class A and Class B common stock. This marks the companys 75th consecutive year of paying and 36th year of uninterrupted increases in their regular quarterly cash dividend. The quarterly cash dividend is payable on... More