Brown-Forman Net Soars 19% in 2d Quarter as Sales Rise 6%

Brown-Forman Net Soars 19% in 2d Quarter as Sales Rise 6%

Brown-Forman Corp. reported a 19% jump in second quarter earnings, to $206 million, or 97 cents a share, on a 6% increase in net sales, to $1.08 billion.

For the first half, the company reported a 10% increase in sales of Jack Daniel’s whiskies, an 18% gain in super-premium whiskey sales, powered by a 27% surge in sales of Woodford ReserveHerradura and el Jimador grew underlying sales 7% and 2%, respectively.

The company’s underlying net sales growth of 7% in the first half of fiscal 2014 was driven by geographically balanced revenue growth. Emerging markets underlying growth rate of 7% was powered by continued strength across a wide range of countries, including China, Brazil, Russia, Thailand, Turkey and India, with each country delivering double-digit growth. Mexico and Poland were down low single-digits, dampening the overall rate of growth in the emerging markets.

Underlying net sales in the U.S. grew 5% (2% reported, 2% constant currency), driven by the combination of strong price/mix and volume growth. Underlying net sales in developed markets outside of the United States grew by 7% (5% reported, 8% constant currency).

Growth was particularly strong in the United Kingdom, France, and Japan with each delivering low double-digit growth. Australia and Germany’s underlying sales were each up low single-digits.

Global price/mix contributed approximately three points to underlying net sales growth in the first half and helped drive 100bps of gross margin expansion, yielding an 8% increase in underlying gross profits (7% reported).

Brand Performance

The company’s North American whiskey portfolio continued to grow globally, led by 10% underlying net sales growth for the Jack Daniel’s trademark. The Jack Daniel’s family of brands enjoyed strong underlying demand across price points and brand extensions.

Jack Daniel’s Tennessee Honey grew underlying net sales by 30%, driven by the brand’s introduction to several new markets outside of the United States and double-digit growth in the United States.

Gentleman Jack grew underlying net sales by 19% on the heels of the recently launched “Order of the Gentleman” television campaign and a significant increase in total media spend. Jack Daniel’s Single Barrel grew underlying net sales 7% and Jack Daniel’s RTDs grew 4% despite a challenging market in Australia.

Other brands within the company’s leading portfolio of North American whiskeys also performed well. Woodford Reserve grew underlying net sales by 27% globally. Old Forester grew underlying net sales by 16%, Early Times family of brands grew underlying sales 5%, and Canadian Mist’s family grew underlying sales 1%.

In vodka, Finlandia’s family of brands’ underlying net sales increased by 1%, driven by double-digit gains in Russia. Underlying sales were negatively impacted in Poland by customer buy-ins at the end of fiscal 2013 ahead of a price increase implemented at the beginning of fiscal 2014.

In tequilas, Herradura grew underlying net sales by 7% as the brand enjoyed solid growth in the United States and Mexico. El Jimador’s underlying net sales grew 2% as the Mexican marketplace for mainstream tequilas remained competitive. New Mix RTDs’ underlying net sales decline of 16% in the first half of the year was negatively impacted by inventory adjustments following price increases taken at the end of fiscal 2013.

Southern Comfort’s family of brands’ underlying net sales declined 4%. Sales growth of 1% outside of the U.S. was more than offset by declines in the U.S., where the competitive environment for liqueurs remained challenging, particularly on-premise.

Sonoma-Cutrer grew underlying net sales mid single-digits as the brand continued to enjoy strong brand loyalty and pricing power as the No. 1 selling super-premium chardonnay. Korbel grew underlying net sales by 8%.

Underlying global A&P spend increased 8% in the first half (8% reported) as the company continued to invest significantly behind its brand-building activities. The company has seen near-term success from the increased media spend behind Gentleman Jack and Woodford Reserve, as well as supporting the global rollout of Jack Daniel’s Tennessee Honey.

“We are particularly pleased with Brown-Forman’s results in light of recent industry commentary around a slowdown in global spirits momentum, and we are reaffirming our expectations for excellent full year growth in underlying operating income,” said Paul Varga, ceo.


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