Brown-Forman(BF_A) - 2025 Q3 - Quarterly Results

Financial Performance - Third quarter reported net sales decreased 3% to $1.0 billion, with a 6$3.1 billion, with a 2% increase on an organic basis compared to the prior-year period[1] - Operating income for the nine months decreased 13% to $902 million, with a 5$3,081 million compared to $3,214 million in the prior year[21] - Operating income for the same period fell by 13$902 million, down from $1,039 million[21] - Net income decreased by 5$723 million, compared to $758 million in the previous year[21] - Earnings per share (diluted) for the nine months ended January 31, 2025, decreased by 4$1.53 from $1.58[21] - Gross margin for the nine months ended January 31, 2025, was 59.4$78 million gain on the sale of its investment in Duckhorn, impacting diluted earnings per share by $0.14[3] - Operating income increased by 7$33 million impact on operating expenses and income[47] Future Outlook - Organic net sales growth is forecasted in the range of 2% to 4% for fiscal 2025[14] - Organic operating income growth is also expected in the range of 2% to 4% for fiscal 2025[14] - The company anticipates a return to organic net sales and operating income growth for fiscal 2025 despite ongoing external uncertainties[11] Cash Flow and Assets - Cash provided by operating activities increased to $446 million, up from$362 million[25] - Total current assets increased to $4,279 million from$4,036 million[23] - Total liabilities decreased to $4,248 million from$4,649 million[23] - Cash dividends paid per common share increased to $0.6621 from$0.6288[21] Market Performance - Total portfolio net sales decreased by 4% compared to the prior-year period, with organic growth at 2%[33] - Whiskey category depletions declined by 3%, while shipments increased by 1%[30] - Woodford Reserve saw a significant increase in shipments, up 6% year-over-year, with a 2% organic growth[30] - Ready-to-Drink segment reported a 2% increase in depletions and a 4% increase in shipments[30] - Tequila category experienced a 14% decline in both depletions and shipments[30] - The United States market reported a 5% decrease in net sales, with a 1% organic growth[33] - Emerging markets showed a 4% decline in net sales but achieved an 8% organic growth[33] Inventory and Demand Metrics - The company uses non-GAAP measures like "organic change" to assess performance consistently, excluding foreign exchange fluctuations, which can significantly affect GAAP income statement measures[47] - Estimated fluctuations in distributor inventories are provided to understand performance trends, particularly in the U.S. market, which operates under a regulated three-tier system[48] - The company defines "depletions" as a key metric reflecting consumer demand, which may differ from shipments to distributors[57] - A positive difference in estimated net change in distributor inventories suggests a potential decrease in organic trends as distributors reduce inventories[57] - The company emphasizes the importance of consumer takeaway data as a leading indicator of demand trends, derived from external sources like Nielsen[57] Market Segmentation - The company aggregates markets by economic development stage as defined by the IMF, with top developed international markets including Germany, Australia, and the UK[50] - The company’s top emerging markets include Mexico, Poland, and Brazil, contributing to net sales of branded products[54] - The company has adjusted its product category definitions, aggregating "Wine" and "Vodka" with "Rest of Portfolio" due to recent divestitures[52] - The company recognizes revenue upon shipment, which may not align with actual consumer demand reflected in distributor depletions[57]