Financial Performance - Fourth quarter net sales decreased 7% to $894 million, with a 3% decline on an organic basis[3] - Full year reported net sales decreased 5% to $4.0 billion, but increased 1% on an organic basis[3] - Operating income for the fourth quarter decreased 45% to $205 million, and diluted earnings per share decreased 45% to $0.31[3] - Gross profit declined 7% (-2% organic), with gross margin contracting 150 basis points to 58.9% due to higher input costs and unfavorable fixed cost absorption[8] - Net sales for the Tequila portfolio declined 14% (-12% organic), impacted by macroeconomic conditions in Mexico and competition in the U.S.[8] - Net sales decreased by 5% from $4,178 million in 2024 to $3,975 million in 2025[24] - Gross profit declined by 7% from $2,526 million in 2024 to $2,343 million in 2025[24] - Operating income fell by 22% from $1,414 million in 2024 to $1,107 million in 2025[24] - Net income decreased by 15% from $1,024 million in 2024 to $869 million in 2025[24] - Basic earnings per share dropped by 14% from $2.15 in 2024 to $1.84 in 2025[24] - Cash provided by operating activities decreased from $647 million in 2024 to $598 million in 2025[28] - Total assets slightly decreased from $8,166 million in 2024 to $8,086 million in 2025[26] - Total liabilities decreased from $4,649 million in 2024 to $4,093 million in 2025[26] - The effective tax rate increased from 21.2% in 2024 to 19.6% in 2025[24] - Cash dividends paid per common share increased from $0.8466 in 2024 to $0.8886 in 2025[24] - Total portfolio net sales decreased by 5% compared to the prior year, with organic growth at 1%[33] Restructuring and Cost Management - A restructuring initiative resulted in $63 million in charges, with expected annualized savings of $70 to $80 million[11] - The operating margin decreased by 600 basis points to 27.9% for the full year, primarily due to the absence of gains from divested brands[14] - The company approved a restructuring initiative to reduce its structural cost base, including a 12% workforce reduction and the closure of the Louisville-based Brown-Forman Cooperage, resulting in a $63 million impact on cost of sales and operating income for Q3 and Q4 of fiscal 2025[48] - The restructuring and other charges included $60 million in costs and $3 million in inventory charges related to restructuring, impacting overall financial performance[50] Market Trends and Sales Performance - Whiskey category depletions declined by 3%, while shipments increased by 1%[31] - Jack Daniel's Family reported a 4% decrease in depletions and no change in shipments[31] - Ready-to-Drink segment saw a 3% increase in depletions and a 4% increase in shipments[31] - Tequila category experienced an 11% decline in both depletions and shipments[31] - United States net sales decreased by 7%, with organic growth at -2%[33] - Emerging markets showed a 2% decline in net sales but a 9% organic growth[33] - Operating income increased by 7% year-over-year[36] - Non-branded and bulk sales increased by 18% compared to the prior year[34] Revenue Recognition and Inventory Management - The company recognizes revenue upon shipment, with "depletions" measuring consumer demand more accurately than shipments to distributors[56] - A positive estimated net change in distributor inventories suggests potential decreases in organic trends as distributors reduce inventories, while a negative change indicates potential increases as they rebuild inventories[56] - Estimated fluctuations in distributor inventories are provided to understand performance trends, particularly in the U.S. market, which operates under a regulated three-tier system[49] Strategic Decisions and Market Relationships - The company divested Sonoma-Cutrer and Finlandia Vodka, leading to adjustments in product category aggregations starting in fiscal 2025[53] - The company announced the end of its sales, marketing, and distribution relationship with Korbel California Cellars effective June 30, 2025, impacting future market strategies[56] - The company aggregates markets by economic development stages and brands by beverage alcohol categories to explain operational results and highlight trends[51] - Top developed international markets include Germany, Australia, the UK, France, and Canada, while top emerging markets are Mexico, Poland, Brazil, and Türkiye, reflecting net sales of branded products[54] Miscellaneous - The company recognized a $13 million franchise tax refund, impacting overall financial performance positively[47] - The company uses non-GAAP measures like "organic change" to assess performance, excluding foreign exchange impacts, which can distort trends; this approach aids in consistent period comparisons and management incentive calculations[48] - Capital expenditures are planned to be in the range of $125 to $135 million for fiscal 2026[15] - The company anticipates organic net sales and operating income to decline in the low-single digit range for fiscal 2026[15]
Brown-Forman(BF_B) - 2025 Q4 - Annual Results