Brown-Forman Corporation (NYSE: BFA, BFB) reported financial results for its second quarter and first half of fiscal 2024 ended October 31, 2023. Second quarter reported net sales increased 1%¹ to $1.1 billion (-1% on an organic basis²) compared to the same prior-year period. In the quarter, reported operating income increased 8% to $339 million (+9% on an organic basis) and diluted earnings per share increased 6% to $0.50.

For the first six months of the fiscal year, the company’s reported net sales increased 2% to $2.1 billion (+1% on an organic basis) compared to the same prior-year period. First half reported operating income increased 1% to $666 million (+1% on an organic basis) and diluted earnings per share decreased 1% to $0.98.

“Our first half fiscal 2024 results illustrate Brown-Forman’s ability to deliver continued growth, even amid dynamic market conditions and very strong comparisons from the prior-year period,” Brown-Forman’s President and Chief Executive Officer Lawson Whiting said. “While we grew at a slower pace than anticipated, we delivered strong gross margin expansion and continued to invest strongly behind our brands. We continue to believe our premium portfolio and broad geographic footprint will position us for accelerated growth in the second half of the fiscal year.”

First Half of Fiscal 2024 Highlights

•        Reported net sales growth was driven by Emerging markets and supported by growth in Developed International markets and the Travel Retail channel, partially offset by declines in the United States.

•        From a brand perspective:

◦        The recently acquired Gin Mare and Diplomático brands collectively increased the company’s reported net sales by 2%,

◦        New Mix RTD delivered very strong reported net sales growth of 41% (+22% organic), and

◦        Jack Daniel’s Tennessee Apple delivered double-digit reported net sales growth of 51% (+52% organic).

◦        Reported net sales growth was partially offset by Jack Daniel’s Tennessee Whiskey’s reported net sales decline of 4% (-2% organic).

•        Reported gross profit increased 7% (+7% organic) with gross margin expansion of 280 basis points.

•        The company increased reported advertising expense by 17% (+12% organic) to support investment behind its brands for long-term sustainable growth.

•        The Brown-Forman Board of Directors authorized a $400 million share repurchase program and increased the quarterly cash dividend for the 40th consecutive year.

First Half of Fiscal 2024 Brand Results

•        Compared to strong results in the same prior-year period, reported net sales for Whiskey products declined 2% (-1% organic). The Jack Daniel’s Family of Brands’ reported net sales declined 1% (flat on an organic basis) driven by lower volumes for Jack Daniel’s Tennessee Whiskey, Jack Daniel’s Tennessee Honey, and Gentleman Jack partially offset by the growth of Jack Daniel’s Tennessee Apple and Jack Daniel’s super-premium expressions led by Jack Daniel’s Sinatra, Jack Daniel’s Bonded Rye, and Jack Daniel’s Single Barrel. With an exceptionally high comparison in the same prior-year period, Woodford Reserve’s reported net sales declined 3% (-3% organic) and Old Forester’s reported net sales declined 5% (-5% organic).  

•        Ready-to-Drink (RTD) growth continued to be led by consumer preference for convenience and flavor. New Mix’s reported net sales increased 41% (+22% organic) boosted by higher prices and volumes. Reported net sales of Jack Daniel’s RTD/RTP portfolio increased 2% (+1% organic) driven by the continued launch of the Jack Daniel’s & Coca-Cola RTD partially offset by lower volumes of Jack Daniel’s & Cola due to the transition.

•        Reported net sales for the Tequila portfolio grew 2% (-1% organic). el Jimador delivered reported net sales growth of 8% (+7% organic) driven by higher prices, particularly in the United States, and higher volumes in Colombia partially offset by lower volumes in the United States and Mexico. Herradura’s reported net sales declined 5% (-9% organic) driven by lower volumes in the United States partially offset by growth in Mexico.

•        Gin Mare and Diplomático drove the significant increase in Rest of Portfolio’s reported net sales growth of 104% (+17% organic).

First Half of Fiscal 2024 Market Results                                                                                            

•        Emerging markets grew reported net sales 17% (+19% organic) with very strong growth of New Mix in Mexico, Jack Daniel’s Tennessee Apple in Brazil and Chile, and Jack Daniel’s Tennessee Whiskey in the United Arab Emirates and Poland.

•        Developed International markets’ reported net sales increased 3% (-2% organic) fueled by Gin Mare and Diplomático in Italy and the continued launch of Jack Daniel’s Tennessee Apple in South Korea partially offset by lower volumes of Jack Daniel’s Tennessee Whiskey in Japan, following a significant inventory build in the second half of the prior fiscal year.

•        The Travel Retail channel sustained growth, on exceptionally high comparisons in the same prior-year period, with reported net sales increasing 3% (flat organic) led primarily by the super-premium American whiskey portfolio reflecting growth from Woodford Reserve, the launch of Jack Daniel’s American Single Malt, Jack Daniel’s Single Barrel, and the acquisitions of Gin Mare and Diplomático. This growth was partially offset by lower volumes of Jack Daniel’s Tennessee Whiskey and Jack Daniel’s Tennessee Honey.

•        Reported net sales in the United States decreased 4% (-5% organic) driven by lower volumes due to lapping the significant inventory rebuild in the same prior-year period largely related to the recovery from supply chain disruptions. This decline was partially offset by higher prices across the portfolio led by Jack Daniel’s Tennessee Whiskey and the acquisition of Diplomático. 

First Half of Fiscal 2024 Other P&L Items

•        Reported gross profit increased 7% (+7% organic). Gross margin expanded 280 basis points to 61.6% fueled by favorable price/mix, lapping of costs related to supply chain disruptions in the same prior-year period and lower tariff-related costs partially offset by higher input costs and the negative effect of foreign exchange.

•        Reported advertising expense grew 17% (+12% organic) led by increased investment in Jack Daniel’s Tennessee Whiskey, the acquisitions of the Gin Mare and Diplomático brands, and the launch of Jack Daniel’s & Coca-Cola RTD. Reported selling, general, and administrative expenses increased 10% (+9% organic) largely due to higher compensation and benefit-related expenses.

•        The company’s reported operating income increased by 1% (+1% organic) due to higher gross margin partially offset by operating expense growth.

•        Diluted earnings per share declined $0.01 driven primarily by higher interest expense which was partially offset by higher reported operating income and the benefit of a lower effective tax rate.

Financial Stewardship

As announced on October 2, 2023, the Brown-Forman Board of Directors authorized the repurchase of up to $400 million (exclusive of brokerage fees and excise taxes) of outstanding shares of Class A and Class B common stock from October 2, 2023, through October 1, 2024, subject to market and other conditions. As of November 30, 2023, approximately $181 million remained available under the program. 

On November 16, 2023, the Brown-Forman Board of Directors approved a 6% increase in the quarterly cash dividend to $0.2178 per share on its Class A and Class B common stock. The dividend is payable on January 2, 2024, to stockholders of record on December 1, 2023. Brown-Forman, a member of the prestigious S&P 500 Dividend Aristocrats Index, has paid regular quarterly cash dividends for 80 consecutive years and has increased the regular dividend for 40 consecutive years.

For more information, visit brown-forman.com.