Financial Performance - Net sales for the nine months ended January 31, 2025, were $3.1 billion, a decrease of 4% compared to the same period last year, primarily due to the negative effects of acquisitions and divestitures, foreign exchange, and JDCC[108]. - Gross profit for the same period was $1.8 billion, a decrease of 6%, with gross margin declining by 1.5 percentage points to 59.4% from 60.9%[108]. - Operating income for the nine months ended January 31, 2025, was $902 million, a decrease of 13%, driven by higher costs and the absence of the gain on the sale of the Finlandia vodka business[108]. - Diluted earnings per share for the nine months ended January 31, 2025, were $1.53, a decrease of 4% from $1.58 in the prior year[108]. - Operating income for the three months ended January 31, 2025, totaled $280 million, a decrease of 25% compared to the same period last year, with an operating margin decrease of 7.8 percentage points to 27.1%[138]. - For the nine months ended January 31, 2025, operating income totaled $902 million, a decrease of 13% compared to the same period last year, with an operating margin decrease of 3.0 percentage points to 29.3%[139]. - Diluted earnings per share for the three months ended January 31, 2025, was $0.57, a decrease of 5% from $0.60 reported for the same period last year[142]. Sales and Market Trends - Brown-Forman's top developed international markets include Germany, Australia, the UK, France, Canada, and Spain, contributing significantly to net sales[90]. - Net sales in the United States declined by 5%, primarily due to the divestiture of Sonoma-Cutrer and lower volumes of other brands[112]. - Non-branded and bulk business saw a significant increase in net sales by 38%, driven by higher prices for used barrels[112]. - Spain's net sales declined 9%, driven by lower volumes of JDTW, partially offset by positive contributions from Diplomático and Gin Mare[117]. - Net sales in the Rest of Developed International declined 6%, impacted by the divestiture of Finlandia and lower volumes of the Jack Daniel's family of brands in South Korea[117]. - Mexico's net sales decreased 9%, primarily due to lower volumes of the Tequila portfolio and negative foreign exchange effects[117]. - Brazil's net sales increased 6%, led by higher volumes of JDTW and JDTA, despite negative foreign exchange impacts[117]. - Woodford Reserve's net sales increased 10%, driven by higher volumes and favorable price/mix in the United States[121]. - Net sales for JD RTD/RTP brands declined 7%, driven by the impact of JDCC and lower volumes in Germany[125]. Cost Management and Restructuring - The company plans to reduce its structural cost base by approximately 12% through workforce reductions and closing the Louisville-based Brown-Forman Cooperage, impacting operating expenses by $33 million[88]. - The restructuring plan included a workforce reduction of approximately 12% and closing the Louisville-based Brown-Forman Cooperage, negatively impacting operating expenses[106]. - Operating expenses totaled $928 million for the nine months ended January 31, 2025, a decrease of $80 million, or 8%[136]. Gains and Divestitures - Brown-Forman reported a pre-tax gain of $92 million from the sale of its Finlandia vodka business during fiscal 2024[82]. - The company recognized a pre-tax gain of $175 million from the sale of the Sonoma-Cutrer wine business, which included $50 million in cash and a 21.4% ownership stake in The Duckhorn Portfolio Inc.[83]. - The company recognized a $78 million gain on the sale of its investment in Duckhorn during the three months ended January 31, 2025[105]. - The divestiture of Sonoma-Cutrer and Finlandia has led to a reclassification of the "Rest of Portfolio" category, affecting financial comparisons[93]. - The company sold the Finlandia vodka business for $196 million and the Sonoma-Cutrer wine business for $50 million cash, impacting net sales and operating income negatively[104][105]. Tax and Cash Flow - A franchise tax refund of $13 million was recognized in the first quarter of fiscal 2025 due to a change in tax calculation methodology in Tennessee[87]. - The effective tax rate for the three months ended January 31, 2025, was 18.7%, an increase from 16.5% in the same period last year[140]. - The forecasted effective tax rate range for fiscal 2025 has been updated to approximately 20% to 22%[144]. - Cash provided by operations for the nine months ended January 31, 2025, was $446 million, an increase of $84 million from the same period last year[151]. - Cash used for financing activities during the nine months ended January 31, 2025, was $546 million, compared to $212 million in the prior-year period[153]. Organic Growth and Market Insights - Brown-Forman's organic change measures are adjusted for acquisitions, divestitures, foreign exchange, and other items to provide a clearer view of performance[81]. - The company uses consumer takeaway data to estimate market share and trends, indicating a leading indicator of consumer demand[96]. - Estimated net changes in distributor inventories are calculated to understand the impact on organic trends, with positive differences indicating potential decreases in organic trends[99]. - Organic net sales growth is expected to be in the range of 2% to 4% for fiscal 2025[144].
Brown-Forman(BF_B) - 2025 Q3 - Quarterly Report