Supply Chain Pressures Tame Investor Spirits, but Underlying Sales Still Healthy at Brown-Forman

Wide-moat Brown-Forman reported fourth-quarter results in line with our expectations, seeing full-year sales of $3.9 billion and diluted EPS of $1.74 align with our $3.9 billion and $1.72 forecasts, respectively. Broad-based strength was encouraging, with the firm's Americas, developed international markets, emerging markets, and travel segments all contributing to 17% organic sales growth for the fiscal year. Perhaps more importantly, we didn't see meaningful evidence of consumer pressure materializing in the portfolio mix, with momentum across the gamut of premium, super-premium, and more quotidian price points. To this effect, the Jack Daniel's family generated impressive 17% annual growth despite catering to a lower-income clientele across most of its black label and ready-to-drink products. This reinforces our view that the firm's portfolio benefits from an attractive combination of relatively inelastic demand and premium pricing in one of the most attractive enclaves (distilled spirits) in the consumer cyclical space.