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, while diluted earnings per share fell 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 7% from $964 million in 2024 to $894 million in 2025[22] - Gross profit declined by 10% from $569 million in 2024 to $513 million in 2025[22] - Operating income fell by 45% from $375 million in 2024 to $205 million in 2025[22] - Net income decreased by 45% from $266 million in 2024 to $146 million in 2025[22] - Basic earnings per share dropped by 45% from $0.56 in 2024 to $0.31 in 2025[22] - Total portfolio net sales decreased by 5% compared to the prior year, with organic growth at 1%[33] - United States net sales decreased by 7%, with organic growth at -2%[33] - Emerging markets reported a 2% decline in net sales but a 9% organic growth[33] Restructuring and Cost Management - A restructuring initiative resulted in $63 million in charges, expected to deliver $70 to $80 million in annualized savings[11] - 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[50] Future Outlook - The company anticipates organic net sales and operating income to decline in the low-single digit range for fiscal 2026[15] - The company expects continued headwinds in fiscal 2026 due to macroeconomic and geopolitical volatility[4] - Capital expenditures are planned to be in the range of $125 to $135 million for fiscal 2026[15] Market Trends and Performance Metrics - 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] - Non-branded and bulk sales increased by 18% compared to the prior year[34] - The company recognized a $13 million franchise tax refund, impacting overall financial performance positively[47] Revenue Recognition and Inventory Management - The company recognizes revenue upon shipment, with "depletions" reflecting consumer demand more accurately than shipments to distributors[56] - Changes in distributor inventories are calculated to provide insights into organic trends, with positive differences indicating potential decreases in organic trends as distributors reduce 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] Brand and Market Strategy - The company aggregates markets and brands according to economic development stages and 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 include Mexico, Poland, Brazil, and Türkiye[54] - The company has divested brands such as Sonoma-Cutrer and Finlandia Vodka, impacting the aggregation of product categories[53] - The company announced the end of its sales, marketing, and distribution relationship with Korbel California Cellars effective June 30, 2025[56]
Brown-Forman(BF_A) - 2025 Q4 - Annual Results