Brown-Forman navigates fiscal headwinds, reaffirms growth outlook

The spirits giant Brown-Forman seems to have found itself in a game of economic snakes and ladders. While the company’s year-to-date fiscal 2025 results show some headwinds in reported figures, there’s a more palatable story underneath: organic growth remains intact and management remains unfazed by external wobbles. The post Brown-Forman navigates fiscal headwinds, reaffirms growth outlook appeared first on The Drinks Business.

Mar 6, 2025 - 11:18

Brown-Forman navigates fiscal headwinds, reaffirms growth outlook

The spirits giant Brown-Forman seems to have found itself in a game of economic snakes and ladders. While the company’s year-to-date fiscal 2025 results show some headwinds in reported figures, there’s a more palatable story underneath: organic growth remains intact and management remains unfazed by external wobbles. Louisville, KY, February 23, 2020: Façade of the Brown-Forman Corporation building in Louisville, Kentucky

For the third quarter, reported net sales declined 3% to $1 billion (£775 million). However, once the effects of divestitures and foreign exchange are removed, organic net sales actually rose by a rather healthier 6%. Reported operating income took a notable 25% tumble to $280 million but, again, a 23% organic growth suggests the fundamentals remain resilient. Diluted earnings per share saw a slight 5% dip to $0.57. The year-to-date picture follows a similar script. Reported net sales slipped 4% to $3.1 billion, while organic growth still eked out a 2% gain. Reported operating income fell 13% to $902 million, though on an organic basis, it grew 5%. A 4% decline in diluted earnings per share to $1.53 rounds out the picture.

A changing portfolio and category performance

The company’s figures are clouded by the recent divestiture of Finlandia and Sonoma-Cutrer, which significantly weighed on overall net sales. However, key categories tell a more nuanced tale. The whiskey portfolio remained stable, with 2% organic growth, buoyed by Woodford Reserve’s continued ascent and steady performance from Jack Daniel’s Tennessee Whiskey. Some of the pricier Jack Daniel’s expressions — Single Barrel and limited releases — faced a slowdown, partly due to a tough comparison against a high-performing prior year. Tequila, on the other hand, had a rougher ride, with net sales tumbling 15% (-13% organic). Both Herradura and el Jimador were impacted by challenging conditions in Mexico and a competitive market in the US. Ready-to-drink (RTD) offerings showed mixed results, with net sales down 4% but organic growth still a respectable 6%. Jack Daniel’s RTDs dipped 7%, largely due to a business model shift for Jack Daniel’s Country Cocktails, while Mexico’s New Mix RTD range enjoyed a 13% organic boost.

Markets and macroeconomics

On the geographic front, the United States saw a 5% decline (-1% organic), though Woodford Reserve’s ongoing outperformance within the American whiskey category provided a silver lining. The developed international markets mirrored this trend, also declining 5% (-1% organic), with softer sales in South Korea, Germany and the UK, though Japan proved a bright spot thanks to shifts in distributor ordering patterns. Emerging markets declined 4% but grew 8% organically, as strong sales of Jack Daniel’s in Turkey, Brazil and the UAE helped counterbalance the tequila-related struggles in Mexico. Meanwhile, travel retail, that ever-finicky channel, saw net sales drop 5% (-2% organic), mostly due to weaker performance from Jack Daniel’s high-end expressions and the Finlandia divestiture.

Margins and money matters

A deeper look at the books shows that gross profit shrank 6% (-1% organic), with higher costs and unfavourable foreign exchange dragging down margins. Advertising spend was trimmed by 9%, reflecting a strategic shift in Jack Daniel’s marketing approach and the phasing of spend following last year’s launch of the Jack Daniel’s and Coca-Cola RTD. Selling, general and administrative expenses also dipped 7% (-4% organic), helped by cost efficiencies. Restructuring charges of $33 million — stemming from a workforce reduction and the closure of Brown-Forman’s Louisville-based cooperage — added an unwelcome dent to the bottom line. But a silver lining arrived in the form of a $78 million gain from the sale of Brown-Forman’s stake in Duckhorn Portfolio, boosting diluted earnings per share by $0.14. Despite the mixed results, Brown-Forman remains resolutely optimistic. “We are pleased to reaffirm our outlook for organic top and bottom line growth in fiscal 2025 and are proud of our team’s ability to deliver industry-leading growth in this challenging environment,” said chief executive Lawson Whiting. He acknowledged ongoing headwinds but expressed confidence in the company’s people, brands and long-term strategy. The company has reaffirmed its full-year guidance, targeting 2-4% organic net sales and operating income growth, with capital expenditures expected in the range of $180-$190 million. The effective tax rate has been nudged slightly lower, now expected at 20-22%. Brown-Forman’s commitment to its dividend policy remains unshaken. The board has declared a quarterly cash dividend of $0.2265 per share, keeping its proud 81-year track record of consecutive payouts and its 41-year streak of dividend increases firmly intact.