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Brown-Forman Q1 net sales growing

Staff writer ▼ | December 5, 2013
Brown-Forman Corporation reported financial results for its second quarter and the first half of fiscal 2014 ended October 31, 2013. The company's reported net sales grew by 6% to $1,079 million in the quarter, and increased 8% on an underlying basis.
Brown-Forman
Brown-FormanBrown-Forman Corporation reported financial results for its second quarter and the first half of fiscal 2014 ended October 31, 2013. The company's reported net sales grew by 6% to $1,079 million in the quarter, and increased 8% on an underlying basis.


Reported operating income grew 19% to $311 million, and increased 21% on an underlying basis. Diluted earnings per share in the second quarter increased 19% to $0.96 compared to $0.80 in the prior year period. For the first six months of the year, reported net sales increased 4% (+7% on an underlying basis), reported operating income increased 9% (+13% on an underlying basis), and diluted earnings per share increased 9% to $1.62.

The company's underlying net sales growth of 7% in the first half of fiscal 2014 was driven by geographically balanced revenue growth. Emerging markets underlying growth rate of 7% was powered by continued strength across a wide range of countries, including China, Brazil, Russia, Thailand, Turkey and India, with each country delivering double-digit growth. Mexico and Poland were down low single-digits, dampening the overall rate of growth in the emerging markets.

Underlying net sales in the United States grew 5% (2% reported, 2% constant currency), driven by the combination of strong price/mix and volume growth. Underlying net sales in developed markets outside of the United States grew by 7% (5% reported, 8% constant currency). Growth was particularly strong in the United Kingdom, France and Japan with each delivering low double-digit growth. Australia and Germany's underlying sales were each up low single-digits.

Global price/mix contributed approximately three points to underlying net sales growth in the first half and helped drive 100bps of gross margin expansion, yielding an 8% increase in underlying gross profits (7% reported).

The company's North American whiskey portfolio continued to grow globally, led by 10% underlying net sales growth for the Jack Daniel's trademark. The Jack Daniel's family of brands enjoyed strong underlying demand across price points and brand extensions. Jack Daniel's Tennessee Honey grew underlying net sales by 30%, driven by the brand's introduction to several new markets outside of the United States and double-digit growth in the United States.

Gentleman Jack grew underlying net sales by 19% on the heels of the recently launched "Order of the Gentleman" television campaign and a significant increase in total media spend. Jack Daniel's Single Barrel grew underlying net sales 7% and Jack Daniel's RTDs grew 4% despite a challenging market in Australia.

Other brands within the company's leading portfolio of North American whiskeys also performed well. Woodford Reserve grew underlying net sales by 27% globally. Old Forester grew underlying net sales by 16%, Early Times family of brands grew underlying sales 5%, and Canadian Mist's family grew underlying sales 1%.

In vodka, Finlandia's family of brands' underlying net sales increased by 1%, driven by double-digit gains in Russia. Underlying sales were negatively impacted in Poland by customer buy-ins at the end of fiscal 2013 ahead of a price increase implemented at the beginning of fiscal 2014.

In tequilas, Herradura grew underlying net sales by 7% as the brand enjoyed solid growth in the United States and Mexico. El Jimador's underlying net sales grew 2% as the Mexican marketplace for mainstream tequilas remained competitive. New Mix RTDs' underlying net sales decline of 16% in the first half of the year was negatively impacted by inventory adjustments following price increases taken at the end of fiscal 2013.

Southern Comfort's family of brands' underlying net sales declined 4%. Sales growth of 1% outside of the United States was more than offset by declines in the United States, where the competitive environment for liqueurs remained challenging, particularly in the on-premise.

Sonoma-Cutrer grew underlying net sales mid single-digits as the brand continued to enjoy strong brand loyalty and pricing power as the #1 selling super-premium chardonnay. Korbel grew underlying net sales by 8%.


 

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