Brown-Forman(BF_B) - 2025 Q1 - Quarterly Results

Financial Performance - Net sales decreased 8% to $1.0 billion (-4% organic) in Q1 fiscal 2025 compared to the prior year period[1] - Operating income declined 14% to$ 281 million (-13% organic) and diluted EPS decreased 14% to $0.41[1] - Gross profit declined 13% (-8% organic) with gross margin down 330 basis points to 59.4%[9] - Net sales decreased by 8% to$ 951 million in Q2 2024 compared to $1,038 million in Q2 2023[19] - Gross profit declined by 13% to$ 565 million in Q2 2024 from $651 million in Q2 2023[19] - Net income dropped by 16% to$ 195 million in Q2 2024 from $231 million in Q2 2023[19] - Operating income decreased by 14% to$ 281 million in Q2 2024 from $327 million in Q2 2023[19] - Gross margin fell to 59.4% in Q2 2024 from 62.7% in Q2 2023[19] - Operating margin declined to 29.6% in Q2 2024 from 31.5% in Q2 2023[19] - Cash and cash equivalents decreased to$ 416 million in Q2 2024 from $446 million in Q2 2023[21] - Accounts receivable increased to$ 806 million in Q2 2024 from $769 million in Q2 2023[21] - Inventories rose to$ 2,596 million in Q2 2024 from $2,556 million in Q2 2023[21] - Cash provided by operating activities decreased to$ 17 million in Q2 2024 from $38 million in Q2 2023[22] - Total portfolio depletions decreased by 9% to 10.9 million cases, with net sales declining by 8% on a reported basis and 4% organically[26] - Jack Daniel's Family depletions fell by 8% to 7.1 million cases, with net sales down 8% reported and 4% organically[26] - Ready-to-Drink category depletions dropped by 9% to 4.9 million cases, with net sales declining 12% reported and 4% organically[26] - Tequila category depletions decreased by 21% to 0.5 million cases, with net sales down 23% both reported and organically[26] - United States net sales declined by 5% reported and 4% organically, while Developed International markets saw a 9% reported and 6% organic decline[28] - Emerging markets net sales fell by 16% reported but only 5% organically, with Brazil showing strong growth of 18% reported and 29% organically[28] - Estimated net change in distributor inventories showed a 3% increase in the United States and a 4% increase in Developed International markets[30] Product Performance - Whiskey net sales decreased 5% (-3% organic), led by lower Jack Daniel's Tennessee Whiskey volumes[4] - Tequila portfolio net sales declined 23% (-23% organic), with el Jimador down 26% (-26% organic)[4] - Ready-to-Drink portfolio net sales declined 12% (-4% organic), with Jack Daniel's RTD/RTP down 13% (-2% organic)[5] - US net sales declined 5% (-4% organic), with Jack Daniel's Tennessee Whiskey, el Jimador and Korbel leading the decrease[5] - Developed International markets net sales declined 9% (-6% organic), led by lower Jack Daniel's volumes[6] - Emerging markets net sales declined 16% (-5% organic), impacted by foreign exchange and Finlandia divestiture[8] - Diplomático brand shipments increased by 84% with net sales growth of 142% reported and 134% organically[26] - Non-branded and bulk sales grew by 27% both reported and organically[26][28] - Old Forester brand shipments increased by 7% with net sales growth of 16% both reported and organically[26] Market Performance - Developed International markets include Germany, Australia, the UK, France, Canada, and Spain, representing net sales of branded products[43] - Top emerging markets include Mexico, Poland, and Brazil, with Brazil also encompassing Uruguay, Paraguay, and surrounding territories[43] - Travel Retail represents net sales to global duty-free customers, travel retail customers, and the U.S. military[43] Category Definitions - Whiskey category includes Jack Daniel's family of brands, Woodford Reserve, Old Forester, and others, with American whiskey and super-premium American whiskey as subcategories[45][46] - Ready-to-Drink (RTD) category includes Jack Daniel's RTD/RTP products, New Mix, and other RTD/RTP products, with Jack Daniel's & Coca-Cola RTD as a specific subcategory[46] - Tequila category includes el Jimador, Herradura, and other tequilas, while Rest of Portfolio includes divested brands like Sonoma-Cutrer and Finlandia[47] Operational and Strategic Updates - Jack Daniel's Country Cocktails production fully transitioned to Pabst Brewing Company in fiscal 2024, removing non-comparable operating activity related to Brown-Forman-produced products for fiscal 2024 and 2025[38] - Recognized a$ 13 million franchise tax refund in Q1 fiscal 2025 due to a change in Tennessee franchise tax calculation methodology, retroactively applied to fiscal 2020-2023[38] Data and Methodology - Consumer takeaway data, sourced from Nielsen and NABCA, measures consumer purchases from retail outlets and e-commerce channels, reflecting demand trends[50] - Estimated net change in distributor inventories calculated by comparing organic dollar amounts to depletion volumes, indicating potential inventory adjustments[51] Outlook - Fiscal 2025 outlook expects organic net sales growth of 2-4% and organic operating income growth of 2-4%[13]