Jack Daniel's maker misses sales estimates on weak consumer spending

By Shania S Thomas

Sept 2 (Reuters) - ‌Jack Daniel's maker ​Brown-Forman ​missed first-quarter sales estimates and stuck to its annual targets on Wednesday, joining other spirits makers in warning of a ‌challenging consumer environment in the U.S. and Europe.

Consumers have become ⁠more discerning in their spending as concerns about inflation and jobs tighten household budgets. ‌For alcohol makers, that has ‌translated into lower consumption levels as health-conscious consumers watch their calorie intake amid growing use of GLP-1 drugs, and fewer casual purchases.

"We ​anticipate the operating environment for fiscal 2027 to remain challenging, as macroeconomic pressures and geopolitical instability continue to negatively impact consumer behavior ⁠and beverage alcohol consumption, particularly within developed markets," Brown-Forman said.

Rival Pernod Ricard, which ended merger talks with ​Brown-Forman earlier this year, had also reported softer demand in major markets, including the U.S.

Brown-Forman expects annual organic net ​sales to be flat and organic ‌operating income to decline between 3% and 5%.

The forecast reiteration is not "totally unsurprising," although investor skepticism is expected, especially ⁠within the context CEO Lawson Whiting's planned retirement, RBC Capital Markets analyst Nik Modi said.

The company's quarterly sales declined 1% to $911 million, below analysts' average estimate ⁠of $914.9 million, according to data compiled by LSEG.

Traditional spirits companies are now increasingly relying ​on flavored products, ready-to-drink cocktails and other innovations to attract consumers, particularly those who seek convenience and value.

While Brown-Forman's whiskey sales were flat, its ready-to-drink portfolio posted ‌a 20% increase in net sales. Its shares rose about 4%.

The company earned 38 cents per share, slightly ‌above the estimate of 37 cents.

Quarterly gross margin expanded 40 basis points, driven ⁠by lower costs, especially in ‌advertising, and the end ​of its long-running sales and distribution relationship with Korbel California Champagnes.

(Reporting by Shania S Thomas in Bengaluru; Editing by ‌Shilpi Majumdar)

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