Brown-Forman Sees First-Half Sales Rise 5%, But Warns Of Tariff Effects Moving ForwardDecember 5, 2018
Brown-Forman’s sales rose 5% to $1.7 billion on an underlying basis in the six months through October, as operating profit climbed 4% to $596 million. Foreign exchange cut into those results on a reported basis, however, with sales up only 2% and operating profit flat after factoring in those effects.
The company said it expects progress to ramp up slightly in the second half of the year—when it will face easier comparisons against the previous fiscal year—and is projecting full-year underlying sales growth of 6%-7% and underlying operating income growth of 4%-6%. Still, Brown-Forman noted that while the global economy has improved over the past year, “the competitive landscape in the developed world remains intense, and recently enacted retaliatory tariffs on American whiskey have created additional uncertainty.”
In the first half, Woodford Reserve carried Brown-Forman’s U.S. business to 3% organic growth. The super-premium Bourbon label was up by double-digits and was the largest contributor to U.S. progress. Fellow Bourbon brand Old Forester was also a standout performer, the company noted. The group’s flagship Jack Daniel’s franchise was up by mid single-digits, with Gentleman Jack, Tennessee Honey, Tennessee Fire, and RTDs posting gains.
While American whiskey leads the way for Brown-Forman, Tequila also continues to be a growth area. Herradura was up double-digits in the U.S., propelled by the upscale Herradura Ultra, and El Jimador benefited from rising volume and higher prices in the first half. Overall, Brown-Forman said its “value-based takeaway trends” in syndicated retail data remain in the mid single-digit range in the U.S.
Globally, Brown-Forman’s emerging markets business was up 10% in the first half, while its portfolio grew by 5% in developed international markets. Lawson Whiting, who is slated to replace Paul Varga as CEO on January 1, said that the company is largely absorbing the cost of the tariff battle between the U.S. and international markets this fiscal year. Moving forward, Brown-Forman says it’s confident the appeal of its brands can overcome such hurdles, but noted that gross margins began to be negatively impacted during the second quarter due to the cost of the tariffs.—Daniel MarstellerSubscribe to Shanken News Daily’s Email Newsletter, delivered to your inbox each morning.