Sales and Market Performance - In fiscal 2025, the United States accounted for 44% of Brown-Forman's net sales, with the remaining 56% from international markets[19]. - Approximately 27%, 28%, and 29% of reported net sales for fiscal 2023, 2024, and 2025, respectively, occurred in the fourth calendar quarter, indicating seasonality in sales[26]. - The company operates in over 170 countries, with Mexico, Germany, Australia, and the United Kingdom being significant markets, each contributing 7%, 6%, 5%, and 4% to net sales in fiscal 2025[19]. - In fiscal 2025, two largest customers accounted for approximately 13% and 11% of consolidated net sales, indicating a diversified customer base[25]. - Jack Daniel's Tennessee Whiskey remains the 1 selling American whiskey globally, with super-premium offerings receiving World's Best Awards in 2025[13]. - Woodford Reserve sold over 1.8 million nine-liter cases for the fiscal year ended April 30, 2025, with strong double-digit compound annual growth rate since its introduction[44]. - The Jack Daniel's family of brands is the primary revenue driver, with significant investment in brand reputation and consumer trust[73]. - Net sales in the United States declined by 7%, driven by the divestiture of Sonoma-Cutrer and lower volumes in a challenging consumer environment[183]. - Net sales decreased by 5% to $4.0 billion in fiscal 2025, driven by a 7% decline in volume, partially offset by a 2% increase in price/mix[195]. Financial Performance - In fiscal 2025, the company reported net sales of $4.0 billion, a decrease of 5% compared to fiscal 2024, with organic net sales increasing by 1%[179]. - Gross profit for fiscal 2025 was $2.3 billion, down 7% from fiscal 2024, resulting in a gross margin of 58.9%, a decline of 1.5 percentage points[179]. - Operating income decreased by 22% to $1.1 billion in fiscal 2025, primarily due to the absence of gains from the sale of Sonoma-Cutrer and Finlandia, as well as a $47 million impairment charge for the Gin Mare brand[179][173]. - Diluted earnings per share fell to $1.84, a decrease of 14% compared to fiscal 2024, influenced by lower operating income and a gain on the sale of the investment in Duckhorn[179]. - The cumulative total shareholder return for Class B common stock decreased from $100 in 2020 to $61 in 2025, underperforming compared to the S&P 500 Index which increased from $100 to $207 in the same period[146]. - The effective tax rate for fiscal 2025 was 19.6%, down from 21.2% in fiscal 2024[202]. - The company experienced a 33% decline in net sales for the Rest of Portfolio, impacted by divestitures and lower volumes[192]. Strategic Initiatives and Brand Development - Brown-Forman's portfolio includes over 40 brands, with significant recognition and awards for premium products like Woodford Reserve and Old Forester[13]. - The company emphasizes brand-building through creative marketing strategies, aiming to enhance brand recognition and consumer demand[17]. - The Jack Daniel's family of brands will continue to pursue growth opportunities across markets and consumer segments[44]. - The company launched several new products, including Jack Daniel's 14 Year Old and Woodford Reserve Double Double Oaked, contributing to brand growth[175]. - The company launched the Jack & Coke ready-to-drink cocktail in over 25 markets, including the United States, Japan, and the United Kingdom[45]. Sustainability and Community Engagement - The company is committed to environmental sustainability and responsible marketing, which are integral to its long-term growth strategy[40]. - The 2030 Sustainability Strategy was revised to align with industry best practices and current climate science, focusing on supply chain impacts[54]. - A 10-year, $50 million commitment was made to five organizations in west Louisville to support community initiatives[57]. - The anaerobic digester project at the Jack Daniel Distillery is expected to convert byproducts to renewable energy and fertilizer, operational by fiscal 2026[59]. Risks and Challenges - The company faces risks from changes in trade policies and tariffs, including a 25% tariff on goods imported from Canada, which has led to retaliatory measures affecting sales[78]. - Consolidation among beverage alcohol producers and distributors may hinder product distribution and increase competition for shelf space[76]. - The company has experienced a significant decline in sales due to negative publicity, which could adversely affect financial results[73]. - The company is adapting to a more challenging competitive landscape, requiring agility in adopting digital technologies and building analytical capabilities[76]. - Changes in route-to-consumer models could result in temporary or long-term sales disruptions and higher costs[75]. - The company faces risks from changing consumer preferences, which may lead to a decline in demand for premium and super-premium products[79]. - Increased competition from new entrants and diversification by existing suppliers could negatively impact market share and pricing strategies[80]. - Economic downturns could lead to decreased consumer spending and demand for beverage alcohol products, impacting sales[92]. - Cybersecurity threats pose risks to IT systems and data privacy, with past incidents highlighting vulnerabilities that could disrupt operations[117]. Operational and Structural Aspects - The company employs approximately 5,000 people across 45 countries, with a low voluntary turnover rate[62]. - As of May 1, 2025, the company owned and operated 17 distribution companies across 18 countries, transitioning from third-party to owned distribution models[74]. - The company operates production facilities including distilleries and bottling plants in multiple countries, with significant operations in the United States, Mexico, and Ireland[138]. - The company has agreements for contract production in various countries, including Australia, Belgium, and China, to support its global operations[138]. - The company maintains a dual-class share structure, with the Brown family controlling a majority of the voting stock, which may affect the attractiveness of the company as a takeover target[123]. Financial Management and Liquidity - Cash and cash equivalents were $446 million at April 30, 2024, and $444 million at April 30, 2025, with approximately 54% held by foreign subsidiaries[207]. - The company has a $900 million commercial paper program, with average balances of $475 million in 2024 and $373 million in 2025[208][209]. - The average interest rate for the commercial paper was 5.46% in 2024 and decreased to 5.13% in 2025[209]. - The company expects to meet short-term liquidity needs through cash generated from operations and borrowings under the commercial paper program[211]. - Long-term cash requirements primarily involve payments related to long-term debt, employee benefit obligations, and deferred tax liabilities[210].
Brown-Forman(BF_B) - 2025 Q4 - Annual Report