Brown-Forman Corporation (NYSE: BFA, BFB) announced its financial results for the first quarter of fiscal 2025, ending July 31, 2024. The company reported an 8% decrease in net sales, amounting to $1.0 billion, with a 4% decline on an organic basis. Operating income dropped by 14% to $281 million, and diluted earnings per share fell by 14% to $0.41.
Despite these declines, Brown-Forman reaffirmed its full-year fiscal 2025 guidance, projecting organic growth in both revenue and operating income. President and CEO Lawson Whiting noted that the results were in line with expectations.
During the first quarter, the performance of Brown-Forman’s brands was mixed. Sales growth from Diplomático Rum, Old Forester, and Woodford Reserve was outweighed by declines, particularly in Jack Daniel’s Tennessee Whiskey. The recent divestiture of Finlandia also contributed to the decrease in net sales. Geographically, sales fell across all regions, influenced by the timing of shipments and pricing strategies implemented in the previous year.
The company reported a 13% decrease in gross profit, with a reduction in gross margin by 330 basis points, bringing it down to 59.4%. This decline was primarily driven by input cost fluctuations and high inventory levels. However, operating expenses saw a decrease of 12%.
In terms of specific brand results, the whiskey category experienced a 5% decline in net sales. While Old Forester and Woodford Reserve showed growth, it was not enough to counterbalance the lower volumes of Jack Daniel’s Tennessee Whiskey, which were partly affected by the timing of shipments in the prior year. The tequila segment saw a sharper decline, with net sales dropping 23%, driven by lower volumes in key markets such as the United States, Colombia, and Mexico. The Ready-to-Drink portfolio also faced challenges, with a 12% decrease in sales, largely due to changes in business models and reduced volumes in Mexico.
On a market-specific basis, the United States saw a 5% decline in net sales, influenced by lower volumes across several brands, although Woodford Reserve and Old Forester continued to perform well compared to the broader US whiskey market. In developed international markets, sales fell by 9%, mainly due to lower volumes of Jack Daniel’s Tennessee Whiskey and the impact of the Finlandia divestiture. Emerging markets experienced a 16% decline in sales, with reductions in Mexico and the United Arab Emirates being significant factors. The travel retail channel also reported an 11% decrease in sales, driven by lower volumes of premium products and the Finlandia divestiture.
Financially, Brown-Forman’s gross profit decreased by 13%, with a corresponding reduction in gross margin to 59.4%. Advertising and selling expenses were also down, primarily due to reduced spending on Jack Daniel’s and Coca-Cola Ready-to-Drink products. The company declared a regular quarterly cash dividend of $0.2178 per share, payable on October 1, 2024.
Looking ahead to the remainder of fiscal 2025, Brown-Forman expects to return to growth in organic net sales and operating income, despite ongoing macroeconomic and geopolitical challenges. The company forecasts organic net sales growth between 2% and 4%, with operating income growth projected within the same range. Capital expenditures for the year are expected to be between $195 million and $205 million.