Who would have thought that the alcohol and spirits sector, once regarded by investors as one of the most profitable and defensive, could have suffered such a collapse since the end of the pandemic?

As its loyal readers know, MarketScreener is a keen observer of the various players in the industry. See, for example, "Has Rémy Cointreau finally hit rock bottom?", "Pernod Ricard at its lowest valuation multiples", "Diageo: the group shows its limits" and, of course, "Brown-Forman: overheating in the whisky market."

For the latter, the fiscal year just ended did not mark a rebound, but possibly a pause in the bleeding. According to published data, sales fell 5%, operating profit fell 22% and EPS dropped 14%. Organically, i.e. adjusted for the divestment of Finlandia vodka and Sonoma-Cutrer wines, things are stabilizing and even improving significantly compared to last year.

The only exception is the tequila segment, which is in the midst of a slump after a long period of euphoria that saw the Mexican spirit become a huge hit in the US, but the trend has clearly reversed. Geographically, reflecting broader trends, sales declined in the United States, Europe and Australia, by 4% and 5% in organic terms; they grew at a comparable rate in emerging markets and travel retail.

Cash profit—or free cash flow—before exceptional gains on asset disposals reached $497m in fiscal year 2025, compared with $450m last year and $700m before the pandemic. The group's earnings capacity is therefore back to where it was ten years ago. Management does not expect any improvement in the coming fiscal year; on the contrary, it anticipates a significant erosion in sales and profits.

In the absence of growth, the market is therefore valuing Brown-Forman based on its dividend, which is still well covered by free cash flow, and its status as a "dividend aristocrat." It is true that the distribution per share has increased steadily over the past 41 years.

MarketScreener analysts are surprised that the group has not bought back any shares over the past twelve months, even though its valuation multiples have fallen to their lowest levels in ten years. In this respect, the historic low of 10x EBITDA, reached during the subprime crisis, is now not far off.