Brown-Forman reports Q1 FY2023 results
Brown-Forman Corporation has reported its financial results for its first quarter of fiscal 2023, with net sales increasing 11% to US$1.0 billion (+17% on an organic basis) compared to the same prior-year period.
In the quarter, reported operating income increased 19% to US$343 million (+32% on an organic basis) and diluted earnings per share increased 30% to US$0.52.
Lawson Whiting, Brown-Forman’s President and Chief Executive Officer said in the press release, “Building on our exceptional fiscal 2022 results, Brown-Forman is off to a great start in fiscal 2023. Our strong strategic position, premium portfolio, continued innovation, and investment behind our brands have once again delivered double-digit revenue growth. While there is continued uncertainty in the market, I remain optimistic we can continue this momentum and deliver on both short- and long-term growth ambitions.”
First quarter of fiscal 2023 highlights
- Reported net sales grew 11% (+17% organic) and were positively impacted by an estimated net increase in distributor inventories
- The Jack Daniel’s family of brands delivered 11% reported net sales growth (+19% organic), driven by 10% reported net sales growth (+21% organic) from Jack Daniel’s Tennessee Whiskey
- Woodford Reserve grew reported net sales 38% (+39% organic)
- Ready-to-Drink (RTD) was fueled by Jack Daniel’s RTDs and New Mix with reported net sales growth of 17% (+21% organic)
- All geographic clusters and the Travel Retail3 channel benefited from strong growth.
- Reported gross margin expanded 80 basis points
- Marketing investment increased 23% (+28% organic)
First quarter of fiscal 2023 brand results
- The Jack Daniel’s family of brands delivered double-digit reported net sales growth of 11% (+19% organic) led by Jack Daniel’s Tennessee Whiskey, reflecting strong demand and higher prices in emerging markets, developed international markets, and the Travel Retail channel. An estimated net increase in distributor inventories positively impacted reported net sales. This growth was partially offset by the negative effect of foreign exchange. Continued consumer desire for flavor drove gains in Jack Daniel’s Tennessee Honey, Jack Daniel’s RTDs, and Jack Daniel’s Tennessee Fire. Innovation also contributed to net sales growth with the introduction of the Jack Daniel’s Bonded series
- Premium bourbons, propelled by Woodford Reserve and Old Forester, delivered 35% reported net sales growth (+36% organic) driven by higher volumes in the United States. An estimated increase in distributor inventories positively impacted Woodford Reserve’s and Old Forester’s reported net sales
- Ready-to-Drink beverages delivered double-digit reported net sales growth. Consumer preference for convenience spurred Jack Daniel’s RTDs/Ready-to-Pours (RTPs) as reported net sales grew 12% (+17% organic) driven by Australia and Germany. New Mix grew reported net sales 44% (+41% organic) fueled by growth in Mexico as it gained market share in the RTD category
- Herradura’s reported net sales declined 4% (-5% organic) due to cycling significant growth during the same prior-year period in the United States and the current year impact of supply chain challenges
First quarter of fiscal 2023 market results
All geographic clusters and the Travel Retail channel benefited from strong reported net sales growth driven by higher volumes. This growth was partially offset by foreign exchange headwinds. An estimated net increase in distributor inventories positively impacted reported net sales.
Reported net sales in the United States grew 7% (+7% organic) with volumetric gains of Woodford Reserve, Jack Daniel’s Tennessee Honey, and Jack Daniel’s Tennessee Fire. These gains were partially offset by lower volumes for Jack Daniel’s Tennessee Whiskey and Korbel California Champagne due to strong comparisons in the same period last year.
Developed International3 markets experienced recovery of the on-trade channel and the return of travel and tourism as reported net sales increased 9% (+19% organic) due to volumetric growth from Jack Daniel’s Tennessee Whiskey and Jack Daniel’s RTDs. Reported net sales growth in developed international markets was led by Australia, Germany, and Spain.
Emerging markets reported net sales increased 17% (+34% organic) reflecting the growth of Jack Daniel’s Tennessee Whiskey in Sub-Saharan Africa, Brazil, and Chile, as well as New Mix in Mexico.
The Travel Retail channel surged with reported net sales growth of 77% (+85% organic) driven primarily by higher volumes across much of the portfolio as travel continued to rebound.
First quarter of fiscal 2023 other P&L items
- Reported gross profit increased 13% (+21% organic). Gross margin expanded 80 basis points to 61.8%, driven primarily by favorable price/mix and the removal of the EU and U.K. tariffs on American whiskey, partially offset by the negative effect of foreign exchange, higher costs related to supply chain disruptions, and input cost inflation
- Reported advertising expense grew 23% (+28% organic) driven by increased marketing investment in the United States to support Jack Daniel’s Tennessee Whiskey, Herradura, the launch of the Jack Daniel’s Bonded series, and Woodford Reserve. Reported selling, general, and administrative expenses increased 4% (+7% organic), largely driven by higher compensation-related expenses
- The company’s reported operating income increased by 19% (+32% organic)
- Earnings per share increased 30.0% to US$0.52 driven by the increase in reported operating income and the benefit of a lower effective tax rate
First quarter of fiscal 2023 financial stewardship
On July 28, 2022, the Brown-Forman Board of Directors declared a regular quarterly cash dividend of US$0.1885 cents per share on its Class A and Class B common stock. The dividend is payable on October 3, 2022, to stockholders of record on September 6, 2022. Brown-Forman has paid regular quarterly cash dividends for 78 consecutive years and has increased the regular cash dividend for 38 consecutive years.
Fiscal Year 2023 Outlook
The company says it anticipates continued growth in fiscal 2023 despite global macroeconomic and geopolitical uncertainties. It expects the following in fiscal 2023:
- With the strength of its portfolio of brands and strong consumer demand, it expects organic net sales growth in the mid-single digit range
- Considering the net effect of inflation and the removal of the EU and U.K. tariffs on American whiskey, its projects reported gross margin to increase slightly
- Based on the above expectations, it anticipates mid-single digit organic operating income growth
- It expects the fiscal 2023 effective tax rate to be in the range of approximately 22% to 23%
- Capital expenditures are planned to be in the range of US$190 to US$210 million
