Brown-Forman has been hit with a profit and sales decline in its second quarter and revised its adjusted sales forecast to between 4% and 5%, 1% less than it originally announced.
The company reported a profit of $US197m, compared with $200m a year ago.
Sales fell 1% in the United States and 5% in developed international markets, however the company reports “Australia’s results were up slightly given the combined effects of a weak economy and high excise tax environment.”
The overall decline was attributed in part to the sale of Southern Comfort and Tuaca for $US543.5 million to Sazerac Co.
CEO Paul Varga said, “As anticipated, our reported earnings were impacted noticeably in the first half by the absence of the brands we sold in late fiscal year 2016, as well as by adverse foreign exchange. Underlying growth in net sales and operating income was solid considering the strength of last year’s first half.
“We anticipate additional improvement in underlying net sales growth in the second half of fiscal 2017 against more favorable comparisons, as well as continued investments to position the company for sustained long-term growth. We reaffirm our fiscal year 2017 EPS range of $1.71-$1.81.”
Among the highlights of the financial results for the company were:
>> Underlying net sales increasing 2%, and improving from 2% in Q1 to 3% in Q2
>> Underlying net sales in the United States and emerging markets improved quarter over quarter
>> Jack Daniel’s brands growing underlying net sales 2%
>> Jack Daniel’s Tennessee Honey growing underlying net sales 2%
>> 19% growth from Woodford Reserve
>> Herradura growing underlying net sales 16%
>> El Jimador growing underlying net sales 9%
>> New Mix RTDs growing underlying net sales 18%
Around the world, second quarter growth rates were negatively impacted by the delayed timing of holiday season promotions in the United Kingdom and key customer buying patterns in Germany, while underlying net sales in Western Europe grew mid single-digits.
The company’s emerging markets experienced a 1% decline in year-to-date underlying net sales. Mexico and Poland delivered robust double-digit underlying net sales growth while results in Turkey, Russia, Brazil and China declined. The company believes that weaker economic conditions and devalued currencies are contributing to reduced purchasing power in the emerging markets.
Global Travel Retail’s global business has stabilised at lower levels, with underlying net sales growth of 4%.
