Brown-Forman Corp Earnings Are Hard to Swallow as Jack Daniels Maker Misses Profit Estimates
Key takeaways
- Drinks company Brown-Forman’s high-end whiskey sales tanked in Q2
- Pre-mixed cans and tequila sales were up, but it wasn’t enough to save the profit figures
- Brown Forman’s share price fell as much as 8% at the earnings beat
In the harsh desert of consumer spending that we’re seeing, even demand for alcohol is tanking. Brown-Forman’s latest results had some bright spots, but the profit figures left much to be desired from investors looking to see the drinks maker’s higher prices have an impact. It was inevitable the share price tanked — here’s the lowdown.
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What happened with Brown-Forman’s earnings?
Whiskey producer Brown-Forman, which makes beloved whiskeys like Jack Daniels, Woodford Reserve and Gentleman Jack, had a rough quarter. The company reported earnings of 48 cents per share, falling short of analysts’ 53 cents estimate, while net sales for its whiskey products decreased 1% and overall net sales fell 8%.
Brown-Forman blamed higher costs of agave, grains and wood as part of the meagre returns. Advertising expenses also rose by 19% for the second quarter and overall expenses climbed 14% as the struggle to find labor continued.
It wasn’t all bad — Brown-Forman recorded an increase in pre-mixed drinks by 52%, and its el Jimador tequila brand reported a 27% growth in net sales. Overall quarterly revenue was up 3% year-over-year, and the drinks company has reissued its full-year guidance.
How did Wall Street react?
Shares in Brown-Forman’s Class B stock fell as much as 8% at the news, hitting a two-month low for the stock. The share price has gained 2.63% this year so far.
Brown-Forman increased the price of its spirits between 2% and 3% year-on-year, but the fact that hasn’t boosted profits is likely of concern to investors. Still, Wall Street will be pleased to see the drinks maker still thinks its full-year guidance will be 5% to 7% in organic net sales growth and 6% to 8% in organic operating income growth.
“We continue to be confident in the strength of our people, our brands, and our business,” CEO Lawson Whiting said in a press release.
The bottom line
Brown-Forman’s results reflect the clear trend we’ve seen in other retailers and consumer goods’ earnings beats that consumer demand is focused on value over luxury right now as interest rates and inflation eats into disposable income. Thankfully, Brown-Forman can focus its efforts on its ready-to-drink and tequila sales in a bit to boost its bottom line.
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