Brown-Forman (BF-A) Tops Q3 EPS by 2c

Brown-Forman Reports Solid Year-to-Date Results; Reaffirms Full Year Outlook

March 6, 2019 7:45 AM UTC

LOUISVILLE, Ky.--(BUSINESS WIRE)-- Brown-Forman Corporation (NYSE: BFA) (NYSE: BFB) reported results for the third quarter and nine months of fiscal 2019, ended January 31, 2019. For the third quarter, the companys reported net sales1 increased 3% to $904 million (+4% on an underlying basis2) compared to the same prior-year period. The company estimates that underlying net sales growth in the third quarter was negatively impacted by one percentage point due to lower net prices to distributors in certain markets to offset the incremental cost of tariffs. In the quarter, reported operating income grew 4% to $320 million (+4% on an underlying basis) and diluted earnings per share grew 20% to $0.47.

For the first nine months of the fiscal year, the companys reported net sales increased 3% to $2,580 million (+5% on an underlying basis). Reported net sales growth was negatively impacted by three percentage points from foreign exchange. The company estimates that year-to-date underlying net sales growth was negatively impacted by almost one percentage point due to tariff-related lower net prices. Year-to-date reported operating income grew 2% to $916 million (+4% on an underlying basis) and diluted earnings per share of $1.40 increased 12%.

Lawson Whiting, the company's Chief Executive Officer, said, Our portfolio of premium spirits brands delivered solid rates of sustained sales growth, led by the strength of our bourbon and tequila brands, as well as the international expansion of the Jack Daniels trademark. We remain on track to deliver another strong year of results as cost discipline helped offset some of the large burden we are absorbing due to the retaliatory tariffs on American whiskey. Whiting added, The growth opportunity for our brand portfolio remains significant, and our teams around the world are executing on our long-term growth strategy.

Year-to-date Fiscal 2019 Highlights

Underlying net sales grew 5% (+3% reported), with broad-based geographic3 and portfolio contribution: Underlying net sales in the emerging markets grew by 10% (+3% reported), developed international markets by 4% (flat reported), and the United States by 4% (+3% reported) The Jack Daniels family of brands grew underlying net sales 4% (+2% reported), including 2% underlying net sales growth (flat reported) for Jack Daniels Tennessee Whiskey Super-premium American whiskey brands grew underlying net sales 24% (+21% reported), including 24% underlying net sales growth from Woodford Reserve (+21% reported) Herradura and el Jimador grew underlying net sales 14% and 15%, respectively (+9% and +11% reported) Underlying operating income grew 4% (+2% reported) and earnings per share increased 12% to $1.40 The company repurchased $78 million of common stock during the three months ended January 31, 2019

Year-to-date Fiscal 2019 Results By Market - Balanced Geographic Delivery of Growth

The company delivered solid, broad-based growth around the world, with the strongest results coming from the emerging markets, as well as continued mid-single digit growth in the developed world.

Year-to-date underlying net sales in the United States grew 4% (+3% reported). Sales growth continued to accelerate quarter over quarter in fiscal 2019, resulting in 5% underlying net sales growth in the third quarter (7% reported), as back half weighted activities began to take hold in the marketplace. According to six and twelve month syndicated data, Brown-Formans value-based consumer takeaway3 trends are in the mid-single digit range. The companys premium bourbons, Woodford Reserve and Old Forester, remained standout performers in the United States delivering strong double-digit underlying net sales growth. Sales growth for the Jack Daniels family of brands including Jack Daniels Tennessee Whiskey, Gentleman Jack, Jack Daniels RTD/RTP products, Jack Daniels Tennessee Fire and Jack Daniels Tennessee Honey also accelerated sequentially. Herradura and elJimador tequilas grew aggregate underlying net sales double-digits due to continued investments in the brands and favorable category momentum.

Underlying net sales in the companys developed international markets grew 4% (flat reported), driven primarily by volume gains. This growth was suppressed by approximately two points from the previously mentioned tariff-related lower net prices, primarily in Europe. Germany and Australia delivered very strong underlying net sales growth of 13% (+9% reported) and 7% (flat reported), respectively. Spains year-to-date underlying net sales grew double-digits as results continued to benefit from the fiscal 2018 transition to owned distribution. The United Kingdom and France were up modestly, delivering underlying net sales growth of 3% (-5% reported) and 1% (-1% reported), respectively. Canadas underlying net sales declined 5% (-10% reported) due to a change in our selling and marketing structure.

Underlying net sales in the companys emerging markets grew 10% (+3% reported) on top of last years underlying net sales growth of 15% (+19% reported). Mexico remained the largest growth driver, with underlying net sales up 15% (+5% reported), fueled by strong gains across the portfolio of tequila brands, including Herradura, New Mix and el Jimador, as well as continued growth from the Jack Daniels family of brands. Brazil grew underlying net sales 27% (-6% reported) due to strong demand for Jack Daniels Tennessee Whiskey. Poland delivered underlying net sales growth of 1% (+2% reported) as double-digit gains for Jack Daniels Tennessee Whiskey were largely offset by soft results for Finlandia. Russia experienced a 4% increase in underlying net sales (+24% reported). Turkeys underlying net sales declined low single-digits, while reported net sales were down significantly due to adverse foreign exchange. Several other emerging markets, including Southeast Asia, China, Ukraine and India delivered double-digit underlying net sales growth during the first nine months of fiscal 2019.

Travel Retail delivered solid year-to-date results, with underlying net sales up 6% (+1% reported). Growth was led by increased demand for Woodford Reserve, expansion of GlenDronach and BenRiach, as well as new product launches, including Jack Daniels Bottled-in-Bond and Jack Daniels Tennessee Rye.

Year-to-date Fiscal 2019 Results By Brand - Strong Growth in American Whiskey and Tequila

The companys underlying net sales growth was driven by strong global demand for American whiskey. The Jack Daniels family of brands grew underlying net sales 4% (+2% reported) globally, and was negatively impacted by approximately one percentage point due to tariff-related lower net prices. Jack Daniels... More