Brown-Forman(BF_B) - 2026 Q1 - Quarterly Results

Executive Summary & Financial Highlights Brown-Forman's Q1 FY26 performance review covers financial highlights, brand and geographic sales trends, and financial stewardship First Quarter Fiscal 2026 Overview Brown-Forman reported a challenging Q1 FY26 with net sales down 3% (up 1% organically) and operating income down 7% (up 2% organically), while reaffirming its full-year outlook despite a 13% decline in diluted EPS to $0.36 | Metric | Q1 FY26 (Reported) | Change YoY | Q1 FY26 (Organic) | Change YoY (Organic) | | :----------------- | :----------------- | :--------- | :---------------- | :------------------- | | Net Sales | $924 million | -3% | N/A | +1% | | Operating Income | $260 million | -7% | N/A | +2% | | Diluted EPS | $0.36 | -13% | N/A | N/A | - CEO Lawson Whiting stated that solid first-quarter performance reflects decisive actions, superior innovation, and bold route-to-consumer strategies, positioning the company for resilient results despite persistent headwinds. The full-year outlook was reaffirmed[1] Brand Performance Highlights Whiskey net sales remained flat, Tequila saw slight organic growth, and Ready-to-Drink achieved strong organic growth, while the Rest of Portfolio was significantly impacted by divestitures and relationship conclusions | Product Category | Reported Net Sales Change | Organic Net Sales Change | | :--------------- | :------------------------ | :----------------------- | | Whiskey | Flat | Flat | | Tequila | -1% | +1% | | Ready-to-Drink | +6% | +9% | | Rest of Portfolio| -27% | +17% | | Non-branded/bulk | -44% | -44% | Whiskey Portfolio Whiskey net sales were flat due to new product launches offsetting declines in core Jack Daniel's Tennessee Whiskey volumes in key markets - Net sales for Whiskey products were flat (flat organic) due to strong initial shipments of Jack Daniel's Tennessee Blackberry and growth of Jack Daniel's Tennessee Apple in Brazil, offset by lower volumes of Jack Daniel's Tennessee Whiskey in the United States and Germany[3] | Brand | Reported Net Sales Change | Organic Net Sales Change | | :-------------------- | :------------------------ | :----------------------- | | Jack Daniel's Tennessee Whiskey | -4% | -4% | | Jack Daniel's Tennessee Apple | +18% | +16% | | Gentleman Jack | +8% | +11% | Tequila Portfolio Herradura's net sales declined due to U.S. competition, while el Jimador's sales increased from new bottle design, inventory build, and innovation - Herradura's net sales declined 16% (-15% organic) due to lower volumes in the competitive U.S. tequila category. el Jimador's net sales increased 14% (+16% organic) driven by higher U.S. volumes from a new bottle design, inventory build, and Cristalino innovation[7] Ready-to-Drink (RTD) Portfolio New Mix achieved strong organic growth from market share gains, while Jack Daniel's RTD/RTP portfolio saw a slight decline due to Canadian performance - New Mix net sales increased 26% (+36% organic) fueled by market share gains. Jack Daniel's RTD/RTP portfolio declined 2% (-1% organic) due to declines in Canada, partially offset by U.S. growth[7] Rest of Portfolio & Non-branded The Rest of Portfolio net sales declined significantly due to prior-year divestitures and relationship conclusions, while non-branded sales decreased from lower used barrel sales - Rest of Portfolio net sales declined 27% (+17% organic) primarily due to the absence of Sonoma-Cutrer and Finlandia prior-year TSAs and the conclusion of the Korbel Champagne Cellars relationship. This was partially offset by new agency brand distribution in Japan and Mexico, and Gin Mare growth in Italy[7] - Net sales for non-branded and bulk decreased 44% driven by lower used barrel sales[7] Geographic Performance Highlights Emerging markets and Travel Retail showed strong net sales growth, counteracting declines in the United States and Developed International markets due to divestitures and soft consumer demand | Geographic Area | Reported Net Sales Change | Organic Net Sales Change | | :------------------ | :------------------------ | :----------------------- | | United States | -8% | -2% | | Developed International | -8% | -9% | | Emerging | +20% | +25% | | Travel Retail | +8% | +7% | United States U.S. net sales decreased due to prior-year TSA absence, lower volumes of key brands, and the end of the Korbel relationship, partially offset by new product shipments - Net sales in the United States decreased 8% (-2% organic) due to the absence of the Sonoma-Cutrer prior-year TSA, lower volumes of Jack Daniel's Tennessee Whiskey and Herradura, and the end of the Korbel relationship. This was partially offset by strong initial shipments for Jack Daniel's Tennessee Blackberry and distributor transitions[7] Developed International Markets Developed International net sales declined due to soft consumer demand, macroeconomic uncertainty, and lower volumes of Jack Daniel's Tennessee Whiskey in key markets - Net sales declined 8% (-9% organic) due to soft consumer demand impacted by macroeconomic and geopolitical uncertainty, particularly lower volumes of Jack Daniel's Tennessee Whiskey in Germany and the United Kingdom, and the absence of American-made alcohol in Canadian provinces[7] Emerging Markets Emerging markets net sales increased significantly, driven by higher volumes across the Jack Daniel's family of brands in Brazil and Türkiye, and strong growth of New Mix - Net sales increased 20% (+25% organic) driven by higher volumes across the Jack Daniel's family of brands, led by Brazil and Türkiye, and double-digit growth of New Mix[7] Travel Retail Channel Travel Retail net sales increased due to higher volumes of Jack Daniel's Tennessee Whiskey and Gin Mare, influenced by shipment timing and positive foreign exchange - Net sales increased 8% (+7% organic) due to higher volumes of Jack Daniel's Tennessee Whiskey and Gin Mare, partially attributed to shipment timing and positive foreign exchange effects[7] Other P&L Items Gross margin expanded despite cost pressures, while operating income declined due to unfavorable foreign exchange, $12 million in restructuring charges, and a $19 million non-operating pension settlement charge | Metric | Q1 FY26 (Reported) | Change YoY | Q1 FY26 (Organic) | Change YoY (Organic) | | :------------------------- | :----------------- | :--------- | :---------------- | :------------------- | | Gross Profit | N/A | -2% | N/A | -2% | | Gross Margin | 59.8% | +40 bps | N/A | N/A | | Advertising Expenses | N/A | -4% | N/A | -3% | | SG&A Expenses | N/A | -6% | N/A | -7% | | Operating Income | N/A | -7% | N/A | +2% | | Operating Margin | 28.2% | -140 bps | N/A | N/A | - The company incurred $12 million in charges related to the strategic restructuring initiative announced in January 2025[11] - A non-operating pension settlement charge of $19 million was recognized, largely related to an early retirement benefit offered in fiscal 2025[11] Financial Stewardship Brown-Forman declared a regular quarterly cash dividend of $0.2265 per share, continuing its 81-year history of payments and 41 consecutive years of increases - A regular quarterly cash dividend of $0.2265 per share was declared, payable on October 1, 2025[9] - Brown-Forman has paid regular quarterly cash dividends for 81 consecutive years and increased the regular dividend for 41 consecutive years[9] Fiscal 2026 Outlook Brown-Forman anticipates a challenging operating environment for fiscal 2026 with low visibility, focusing on strategic initiatives to unlock future growth Fiscal 2026 Outlook Brown-Forman anticipates a challenging fiscal 2026 operating environment with low visibility, focusing on strategic initiatives like U.S. distribution evolution, restructuring, and new product innovation for long-term growth - The operating environment for fiscal 2026 is expected to be challenging with low visibility due to macroeconomic and geopolitical volatility, consumer uncertainty, potential tariffs, and lower non-branded sales of used barrels[10] - Strategic initiatives for fiscal 2026 include significant evolution of U.S. distribution, a restructuring initiative, and meaningful new product innovation to unlock future growth[10] | Expectation | Range/Value | | :-------------------------- | :---------------- | | Organic Net Sales Decline | Low-single digit | | Organic Operating Income Decline | Low-single digit | | Effective Tax Rate | 21% to 23% | | Capital Expenditures | $125 to $135 million | Company Information & Contacts This section provides an overview of Brown-Forman Corporation, its global operations, premium brand portfolio, and key investor and media contact information Company Overview Brown-Forman Corporation, a global spirits leader for over 155 years, is headquartered in Louisville, Kentucky, with a premium brand portfolio and operations in over 170 countries with approximately 5,000 employees - Brown-Forman Corporation is a global leader in the spirits industry for over 155 years, headquartered in Louisville, Kentucky[13] - Its premium portfolio includes the Jack Daniel's Family of Brands, Woodford Reserve, Old Forester, New Mix, el Jimador, Herradura, The Glendronach, Glenglassaugh, Benriach, Diplomático Rum, Gin Mare, Fords Gin, Chambord, and Slane[13] - The company has approximately 5,000 employees worldwide and shares its products in more than 170 countries[13] Investor & Media Contacts Contact information for external communications and investor relations is provided for inquiries regarding the company's financial results and operations - Elizabeth Conway is the Director of External Communications, and Sue Perram is the Vice President and Director of Investor Relations[14] Forward-Looking Statements & Risk Factors This section outlines the company's forward-looking statement disclaimer and details key risk factors that could materially impact future financial results and operations Forward-Looking Statements This section disclaims forward-looking statements, noting inherent risks and uncertainties that may cause actual results to differ materially, with no intent to update unless legally required - The press release contains forward-looking statements that involve risks, uncertainties, and other factors that could cause actual results to differ materially[15] - The company does not intend to update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise, except as required by law[15] Key Risk Factors Key risks include substantial dependence on the Jack Daniel's family of brands, intense competition, distribution disruptions, trade policy changes, supply chain issues, and global economic conditions, alongside product liability, negative publicity, and talent retention challenges - Key risks include substantial dependence on the Jack Daniel's family of brands, intense competition, disruption of distribution networks, and changes in trade policies, tariffs, and import/export regulations[17] - Other significant risks involve changes in consumer preferences, production facility or supply chain disruption, higher costs of raw materials or labor, and unfavorable global or regional economic conditions[17] - Additional risks include product recalls, negative publicity, failure to attract or retain talent, fluctuations in foreign currency exchange rates, changes in laws/regulations, and cyber breaches[17] Unaudited Consolidated Financial Statements This section presents the unaudited consolidated statements of operations, balance sheets, and cash flows for Brown-Forman, detailing the company's financial performance and position Consolidated Statements of Operations For the three months ended July 31, 2025, Brown-Forman reported a 3% decrease in net sales to $924 million, a 7% decline in operating income to $260 million, and a 13% decrease in net income to $170 million | Metric | 3 Months Ended July 31, 2024 (Millions) | 3 Months Ended July 31, 2025 (Millions) | Change (%) | | :-------------------------------------- | :-------------------------------------- | :-------------------------------------- | :--------- | | Net sales | $951 | $924 | (3%) | | Cost of sales | $386 | $372 | (4%) | | Gross profit | $565 | $552 | (2%) | | Advertising expenses | $126 | $120 | (4%) | | Selling, general, and administrative expenses | $188 | $177 | (6%) | | Restructuring and other charges | — | $12 | N/A | | Operating income | $281 | $260 | (7%) | | Net income | $195 | $170 | (13%) | | Diluted earnings per share | $0.41 | $0.36 | (13%) | | Gross margin | 59.4% | 59.8% | +0.4% | | Operating margin | 29.6% | 28.2% | -1.4% | Condensed Consolidated Balance Sheets As of July 31, 2025, total assets increased to $8,171 million, while total liabilities rose to $4,183 million, primarily due to increased current portion of long-term debt and dividends payable | Metric | April 30, 2025 (Millions) | July 31, 2025 (Millions) | | :-------------------------------------- | :------------------------ | :----------------------- | | Cash and cash equivalents | $444 | $471 | | Total current assets | $4,195 | $4,178 | | Total assets | $8,086 | $8,171 | | Total current liabilities | $1,080 | $1,497 | | Long-term debt | $2,421 | $2,075 | | Total liabilities | $4,093 | $4,183 | | Stockholders' equity | $3,993 | $3,988 | Condensed Consolidated Statements of Cash Flows For the three months ended July 31, 2025, cash provided by operating activities significantly increased to $160 million, while cash used for financing activities rose to $138 million, and investing activities provided $2 million | Cash Flow Activity | 3 Months Ended July 31, 2024 (Millions) | 3 Months Ended July 31, 2025 (Millions) | | :-------------------------------------- | :-------------------------------------- | :-------------------------------------- | | Cash provided by operating activities | $17 | $160 | | Cash provided by (used for) investing activities | $10 | $2 | | Cash provided by (used for) financing activities | ($51) | ($138) | | Net increase (decrease) in cash, cash equivalents, and restricted cash | ($30) | $27 | | Cash and cash equivalents at end of period | $416 | $471 | Supplemental Financial Information This section provides supplemental financial information, including reconciliations of organic performance, detailed brand and geographic sales, and estimated distributor inventory changes Organic Performance Reconciliation (Schedule A) Schedule A reconciles reported to organic changes for key statement of operations metrics, adjusting for acquisitions, divestitures, other items, and foreign exchange to reveal underlying business performance | Metric | Reported Change | Acquisitions and Divestitures | Other Items | Foreign Exchange | Organic Change | | :--------------------- | :-------------- | :---------------------------- | :---------- | :--------------- | :------------- | | Net sales | (3%) | 3% | —% | —% | 1% | | Gross profit | (2%) | (1%) | —% | 1% | (2%) | | Advertising expenses | (4%) | 2% | —% | (1%) | (3%) | | SG&A | (6%) | —% | (1%) | (1%) | (7%) | | Operating income | (7%) | 2% | 3% | 5% | 2% | Brand & Product Category Performance (Schedule B) Schedule B details net sales changes by product category and brand, illustrating the impact of acquisitions, divestitures, and foreign exchange on organic growth, with New Mix and Gin Mare showing strong performance | Product Category / Brand Family | Reported Net Sales % Change | Acquisitions and Divestitures | Foreign Exchange | Organic Net Sales % Change | | :------------------------------ | :-------------------------- | :---------------------------- | :--------------- | :------------------------- | | Whiskey | —% | —% | —% | —% | | Jack Daniel's Tennessee Whiskey | (4%) | —% | —% | (4%) | | Jack Daniel's Tennessee Apple | 18% | —% | (2%) | 16% | | Ready-to-Drink | 6% | —% | 3% | 9% | | New Mix | 26% | —% | 10% | 36% | | Tequila | (1%) | —% | 1% | 1% | | el Jimador | 14% | —% | 1% | 16% | | Herradura | (16%) | —% | 1% | (15%) | | Rest of Portfolio | (27%) | 44% | —% | 17% | | Gin Mare | 40% | —% | (4%) | 36% | Geographic Performance Details (Schedule C) Schedule C details geographic net sales changes, highlighting strong organic growth in Emerging markets, particularly Brazil and Türkiye, contrasted by significant declines in Developed International markets like Canada and the United Kingdom | Geographic Area | Reported Net Sales % Change | Acquisitions and Divestitures | Foreign Exchange | Organic Net Sales % Change | | :------------------ | :-------------------------- | :---------------------------- | :--------------- | :------------------------- | | United States | (8%) | 6% | —% | (2%) | | Developed International | (8%) | 1% | (1%) | (9%) | | Germany | (10%) | 1% | (3%) | (13%) | | United Kingdom | (16%) | 1% | —% | (16%) | | Canada | (62%) | 2% | —% | (59%) | | Emerging | 20% | 1% | 3% | 25% | | Mexico | 14% | —% | 9% | 22% | | Brazil | 31% | —% | (1%) | 30% | | Türkiye | 11% | —% | 27% | 39% | | Travel Retail | 8% | —% | (2%) | 7% | Estimated Distributor Inventory Changes (Schedule D) Schedule D estimates distributor inventory changes, showing increases in the U.S. and Emerging markets that could impact future organic trends, while Herradura's inventory decrease suggests potential for organic trend increases | Geographic Area - Net Sales | Estimated Net Change in Distributor Inventories vs. Prior-Year Period | | :-------------------------- | :------------------------------------------------------------------ | | United States | 6% | | Developed International | (1%) | | Emerging | 10% | | Travel Retail | —% | | Product Category / Brand Family / Brand | Estimated Net Change in Distributor Inventories vs. Prior-Year Period | | :-------------------------------------- | :------------------------------------------------------------------ | | Whiskey | 4% | | Jack Daniel's Tennessee Apple | 14% | | Old Forester | 13% | | Tequila | 7% | | el Jimador | 20% | | Herradura | (5%) | - A positive difference indicates a net increase in distributors' inventories, implying that organic trends could decrease as distributors reduce inventories. A negative difference implies that organic trends could increase as distributors rebuild inventories[33] Notes to Financial Information This section provides important context for the financial information, including definitions of non-GAAP financial measures and key aggregations and metrics used in the report Non-GAAP Financial Measures This section explains the use of non-GAAP 'organic change' measures, which adjust GAAP results for acquisitions, divestitures, other items, and foreign exchange to provide a clearer understanding of underlying business performance and comparability - Non-GAAP measures, such as 'organic change,' are used to supplement GAAP results by adjusting for acquisitions and divestitures, other items, and foreign exchange to provide a consistent understanding of performance[36][37][43] - Adjustments for acquisitions and divestitures include removing gains/losses on sales, non-recurring effects, and operating activity for non-comparable periods related to brands like Gin Mare, Finlandia, Sonoma-Cutrer, and Korbel Champagne Cellars[37][38][39][40] - Other items adjusted for include a $13 million franchise tax refund in Q1 FY25, $12 million in restructuring charges in Q1 FY26, and an $18 million net benefit from substitution drawback claims in Q1 FY26[40][41][42][43] Definitions of Aggregations and Metrics This section defines key geographic and brand aggregations, including 'Developed International,' 'Emerging,' 'Whiskey,' 'Ready-to-Drink,' and 'Tequila,' along with metrics like 'Shipments,' 'Depletions,' and 'Estimated net change in distributor inventories' for understanding sales trends - Geographic aggregations include 'Developed International' (IMF advanced economies excluding U.S.), 'Emerging' (IMF emerging and developing economies), and 'Travel Retail' (global duty-free and U.S. military customers)[49] - Brand aggregations define categories like 'Whiskey' (including Jack Daniel's family, Woodford Reserve), 'Ready-to-Drink' (RTD/RTP products like Jack Daniel's RTD/RTP, New Mix), and 'Tequila' (el Jimador, Herradura)[47][49] - Other metrics include 'Shipments' (revenue recognition), 'Depletions' (volume reflecting consumer demand), 'Consumer takeaway' (retail sales value by consumers), and 'Estimated net change in distributor inventories' (difference between shipments and depletions to gauge inventory levels)[52]