Brown-Forman's President and Chief Executive Officer
First Quarter of Fiscal 2022 Highlights
Net sales grew 20% (+18% underlying)
Strong growth across all geographic clusters and the Travel Retail3 channel
Premium bourbons grew net sales 34% (+36% underlying)
The tequila portfolio grew net sales 32% (+23% underlying)
Advertising increased 46% (+44% underlying) as the company supported brand momentum
The company generated strong free cash flow2 of
First Quarter of Fiscal 2022 Brand Reported Results
Jack Daniel's Tennessee Apple's net sales growth was fueled by the ongoing international launch.
Premium bourbons, led by Woodford Reserve and Old Forester, maintained double-digit net sales growth driven by strong volumetric gains in
The tequila portfolio was led by double-digit net sales growth for Herradura and el Jimador. In particular, Herradura benefited from resurgent demand in
First Quarter of Fiscal 2022 Market Reported Results
Strong net sales growth in the United States3 was primarily driven by double-digit growth from Jack Daniel's Tennessee Whiskey, premium bourbons, and tequilas. Jack Daniel's Tennessee Whiskey benefited from higher volumes and favorable channel mix shift to the on-premise channel.
Developed international3 markets maintained double-digit net sales growth driven by broad-based growth led by
Emerging markets3 returned to double-digit net sales growth propelled by volume gains across most markets, partially offset by declines throughout most countries in
Net sales in Travel Retail3 increased primarily due to a favorable comparison to the same prior-year period, which was impacted by significant disruption due to COVID-19 travel bans and restrictions.
First Quarter of Fiscal 2022 Other P&L Items
Company-wide price/mix increased 19% reflecting the favorable impact of faster growth from our higher-priced brands and favorable mix shift to the on-premise channel. Volumetric growth across the portfolio was offset by the decline in New Mix, resulting in a 1% volume decline in total.
Gross profit increased 19% (+17% underlying), while gross margin contracted 70 basis points to 61% driven by higher input costs related to agave and the impact of supply chain constraints, partially offset by the favorable shift in portfolio mix towards higher-margin brands and channels.
The company's investment in advertising increased 46% (+44% underlying) driven by higher spend to support the international launch of Jack Daniel's Tennessee Apple, increased spend for Woodford Reserve compared to the same prior-year period partially due to the timing of the
Selling, general and administrative expenses increased 14% (+11% underlying) reflecting the timing of higher compensation-related expenses, an increase in non-income tax reserves, and cycling against lower discretionary spend in the prior-year period.
Operating income decreased 25% (+15% underlying), while diluted earnings per share decreased 41% to
Prior-year earnings per share included a
First Quarter of Fiscal 2022 Financial Stewardship
On
Fiscal 2022 Outlook
Due to the volatility and uncertainty that continues to exist in the operating environment, including recent COVID-19 trends and global supply chain disruptions, we have revised some of our expectations for fiscal 2022. Currently, we are managing through the impact of global supply chain disruptions, including glass supply, and have deployed a number of risk mitigation strategies to address the various constraints on our business. While we expect these disruptions to persist throughout the fiscal year, we believe the impact will become less significant in the second half of the year.
We expect a more significant unfavorable impact from supply chain disruptions and higher input costs related to agave, transportation costs, and commodity prices to negatively impact our gross margin. As a result of these factors, we expect gross margin to be flat, or slightly down, for the full year versus the slight improvement originally expected.
Despite these challenges, we still anticipate mid-single digit growth in underlying net sales, underlying operating expenses, and underlying operating income for fiscal 2022.
As a result of these factors coupled with unusual comparisons to last year, we expect the seasonality of our results to be volatile during the year.
We expect our effective tax rate to be in the range of about 22-23%.
Conference Call Details
Brown-Forman will host a conference call to discuss these results at
For over 150 years,
Important Information on Forward-Looking Statements:
This press release contains statements, estimates, and projections that are 'forward-looking statements' as defined under
Our substantial dependence upon the continued growth of the
Substantial competition from new entrants, consolidations by competitors and retailers, and other competitive activities, such as pricing actions (including price reductions, promotions, discounting, couponing, or free goods), marketing, category expansion, product introductions, or entry or expansion in our geographic markets or distribution networks
Route-to-consumer changes that affect the timing of our sales, temporarily disrupt the marketing or sale of our products, or result in higher fixed costs
Disruption of our distribution network or inventory fluctuations in our products by distributors, wholesalers, or retailers
Changes in consumer preferences, consumption, or purchase patterns - particularly away from larger producers in favor of small distilleries or local producers, or away from brown spirits, our premium products, or spirits generally, and our ability to anticipate or react to them; further legalization of marijuana; shifts in consumer purchase practices; bar, restaurant, travel, or other on-premise declines; shifts in demographic or health and wellness trends; or unfavorable consumer reaction to new products, line extensions, package changes, product reformulations, or other product innovation
Production facility, aging warehouse, or supply chain disruption
Imprecision in supply/demand forecasting
Higher costs, lower quality, or unavailability of energy, water, raw materials, product ingredients, or labor
Impact of health epidemics and pandemics, including the COVID-19 pandemic, and the risk of the resulting negative economic impact and related governmental actions
Unfavorable global or regional economic conditions, particularly related to the COVID-19 pandemic, and related economic slowdowns or recessions, low consumer confidence, high unemployment, weak credit or capital markets, budget deficits, burdensome government debt, austerity measures, higher interest rates, higher taxes, political instability, higher inflation, deflation, lower returns on pension assets, or lower discount rates for pension obligations
Product recalls or other product liability claims, product tampering, contamination, or quality issues
Negative publicity related to our company, products, brands, marketing, executive leadership, employees, board of directors, family stockholders, operations, business performance, or prospects
Failure to attract or retain key executive or employee talent
Risks associated with acquisitions, dispositions, business partnerships, or investments - such as acquisition integration, termination difficulties or costs, or impairment in recorded value
Risks associated with being a
Failure to comply with anti-corruption laws, trade sanctions and restrictions, or similar laws or regulations
Fluctuations in foreign currency exchange rates, particularly a stronger
Changes in laws, regulatory measures, or governmental policies - especially those that affect the production, importation, marketing, labeling, pricing, distribution, sale, or consumption of our beverage alcohol products
Tax rate changes (including excise, corporate, sales or value-added taxes, property taxes, payroll taxes, import and export duties, and tariffs) or changes in related reserves, changes in tax rules or accounting standards, and the unpredictability and suddenness with which they can occur
Decline in the social acceptability of beverage alcohol in significant markets
Significant additional labeling or warning requirements or limitations on availability of our beverage alcohol products
Counterfeiting and inadequate protection of our intellectual property rights
Significant legal disputes and proceedings, or government investigations
Cyber breach or failure or corruption of our key information technology systems or those of our suppliers, customers, or direct and indirect business partners, or failure to comply with personal data protection laws
Our status as a family 'controlled company' under
For further information on these and other risks, please refer to our public filings, including the 'Risk Factors' section of our annual report on Form 10-K and quarterly reports on Form 10-Q filed with the
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