Jack Daniel's parent company's stock sinks after surprise drop in profit as whiskey sales fall

By Tomi Kilgore

Brown-Forman maintains full-year outlook, as issues hurting results are expected to moderate

Shares of Brown-Forman Corp. took a beating Wednesday after the spirits company, which is the parent of the Jack Daniel's whiskey brand, reported a surprise drop in fiscal first-quarter profit and sales that came up a bit shy.

"As anticipated, our first-quarter growth was impacted by the difficult shipment comparison from fiscal 2023, when we rebuilt inventory impacted by prior glass-supply challenges," said Chief Executive Lawson Whiting.

Meanwhile, the company reiterated its full-year guidance range for organic sales growth, with Whiting saying the first-quarter headwinds were expected to moderate.

The stock (BFA) dropped 4.0% to seven-week closing low of $66.28.

Net income for the quarter ending July 31 fell to $231 million, or 48 cents a share, from $249 million, or 52 cents a share, in the same period a year ago, while the FactSet consensus was for earnings per share to rise to 53 cents.

Sales grew 3.1% to $1.038 billion but missed the FactSet consensus of $1.053 billion.

Reported sales for whiskey products fell 1%, led by declines in Woodford Reserve and Gentleman Jack sales amid a net decrease in distributor inventories. Sales of Jack Daniel's Tennessee Whiskey were flat.

Meanwhile, tequila sales jumped 15%, fueled by 27% growth in sales of the el Jimador brand, due primarily to higher prices in the U.S. and increased volumes in Colombia.

And the ready-to-drink category continued to grow, with New Mix sales surging 52% amid increases in both prices and volumes. Within the RTD category, sales of Jack Daniel's RTD and ready-to-pour products were flat, given lower volumes of Jack Daniel's & Cola.

For fiscal 2024, the company still expects organic net sales growth in the 5% to 7% range.

"While we remain optimistic about our prospects for growth of organic net sales and organic operating income in fiscal 2024, we continue to believe trends will normalize after two consecutive years of double-digit organic net sales growth," the company said in a statement.

The stock has gained 7.3% over the past three months, while the S&P 500 index SPX has advanced 8.0%.

-Tomi Kilgore

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08-31-23 0755ET

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