Financial Performance - Second quarter reported net sales decreased 5% to $1.0 billion, with a 2% decline on an organic basis compared to the prior-year period[2] - First half reported net sales decreased 4% to $2.0 billion, remaining flat on an organic basis compared to the same prior-year period[2] - Operating income decreased 9% to $565 million, with an operating margin decrease of 150 basis points to 28.9%[10] - Net income for the six months was $394 million, reflecting a 13% decline from $453 million in 2024[26] - Earnings per share (diluted) were $0.83, a decrease of 13% compared to $0.96 in the prior year[26] - Net sales decreased by 4% compared to the prior-year period, with organic sales also showing no change[36] - In the United States, net sales fell by 9%, while emerging markets saw a 10% increase in net sales[36] - The company reported a 3% increase in total portfolio volumes for the six months, with net sales showing a reported change of (4%)[34] Gross Margin and Profitability - Gross margin expanded by 30 basis points to 59.5%, driven by acquisitions and divestitures, despite higher costs[4] - Gross profit for the same period was $1,167 million, down 4% from $1,211 million in 2024[26] - The cost of sales increased by 1%, while gross profit also rose by 1%[40] - The effective tax rate improved to 20.1% from 21.2% year-over-year[26] Cash Flow and Capital Expenditures - Cash flows from operations grew by $163 million to $292 million, while free cash flow increased by $179 million to $236 million[4] - Free cash flow for the six months ended October 31, 2025, was $236 million, up from $57 million in the same period last year[41] - The estimated capital expenditures range for fiscal 2026 has been updated to $110 to $120 million[15] Market Performance - Net sales in Emerging markets increased by 10% (+12% organic), led by strong growth in New Mix and higher volumes across the Jack Daniel's family of brands[8] - The Tequila portfolio's net sales declined 3%, with Herradura's net sales down 11% due to competitive pressures[8] - The company experienced a 62% decline in net sales in Canada, contrasting with a 22% increase in Brazil[36] - The whiskey category overall grew by 1%, with Woodford Reserve increasing by 4%[39] - The travel retail segment experienced a 7% increase in net sales[36] Shareholder Actions - The Board of Directors authorized a $400 million share repurchase program and increased the quarterly cash dividend by 2% to $0.2310 per share[11][12] Inventory and Demand Indicators - Estimated net change in distributor inventories in the United States was up by 2%, while developed international markets saw a decrease of 1%[38] - "Depletions" measure volume reflecting consumer demand more accurately than shipments to distributors[62] - Consumer takeaway data, sourced from Nielsen and NABCA, serves as a leading indicator of consumer demand trends[62] - The calculation of "depletion-based" amounts helps in understanding the relationship between shipments and actual consumer demand[62] - The company emphasizes the importance of understanding changes in distributor inventories in the context of operating results[62] Restructuring and Future Outlook - The company anticipates organic net sales and operating income to decline in the low-single digit range for fiscal 2026[16] - The restructuring initiative included a workforce reduction of approximately 12% and incurred $16 million in related charges[52] - The Korbel relationship ended effective June 30, 2025, impacting future revenue streams[62]
Brown-Forman(BF_A) - 2026 Q2 - Quarterly Results