Financial Performance - For the six months ended October 31, 2025, the company reported net sales of $2.0 billion, a decrease of 4% compared to the same period last year[106]. - Gross profit for the same period was $1.2 billion, also a decrease of 4%, with a gross margin increase of 0.3 percentage points to 59.5%[106]. - Operating income decreased by 9% to $565 million, with an operating margin decline of 1.5 percentage points to 28.9%[106]. - Diluted earnings per share for the six months ended October 31, 2025, were $0.83, a decrease of 13% from $0.96 in the prior year[107]. - For the six months ended October 31, 2025, net sales totaled $2.0 billion, a decrease of $86 million, or 4%, driven by unfavorable price/mix[124]. - Gross profit for the six months ended October 31, 2025, totaled $1.2 billion, a decrease of $45 million, or 4%, with gross margin increasing to 59.5% from 59.2%[129]. - Operating income for the three months ended October 31, 2025, totaled $305 million, a decrease of $36 million, or 10%, compared to the same period last year, with an operating margin decrease of 1.7 percentage points to 29.4%[134]. - For the six months ended October 31, 2025, operating income was $565 million, down $57 million, or 9%, with an operating margin decrease of 1.5 percentage points to 28.9%[135]. - Diluted earnings per share for the three months ended October 31, 2025, decreased 14% to $0.47, driven by the decrease in operating income[138]. Market Performance - The United States market experienced a 9% decline in net sales, primarily due to the end of the Korbel relationship and the absence of the Sonoma-Cutrer brand[112]. - Emerging markets saw a 10% increase in net sales, with Mexico and Brazil growing by 17% and 22%, respectively[112]. - Canada's net sales declined 62% due to volumetric declines in the American whiskey portfolio and JD RTDs, attributed to the absence of American-made beverage alcohol from retail shelves in most provinces[116]. - Mexico's net sales increased 17%, driven by higher volumes and prices of New Mix, although tequila sales declined as consumer preferences shifted to lower-priced products[116]. - Brazil's net sales increased 22%, reflecting higher volumes of JDTA and JDTW, supported by continued distribution expansion and favorable retailer ordering patterns[116]. - Net sales for JDTA increased 16%, primarily due to growth in Brazil and favorable timing of retailer ordering patterns[119]. - New Mix net sales increased 28%, driven by strong growth in Mexico and market share gains in a growing category[122]. - Non-branded and bulk's net sales decreased 61%, driven by the decline of used barrel sales as demand and pricing adjusted to current market conditions[121]. - Net sales for the Rest of Whiskey increased 54%, driven by the launch of JDTB and growth of The GlenDronach, benefiting from an estimated net increase in distributor inventories in the United States[122]. Restructuring and Initiatives - A restructuring initiative was approved, resulting in a workforce reduction of approximately 12% and incurring $16 million in related charges during the first and second quarters of fiscal 2026[87]. - The company underwent a restructuring initiative, reducing its workforce by approximately 12% and closing the Brown-Forman Cooperage, which negatively impacted operating expenses[104]. - The company transitioned its portfolio distribution in California and 13 additional markets, positively impacting net sales in the first quarter of fiscal 2026[105]. - The company has authorized a share repurchase program of up to $400 million, with $99 million spent on repurchases in October 2025 alone[153]. Tax and Refunds - The company recognized a $13 million franchise tax refund in the first quarter of fiscal 2025 due to a change in tax calculation methodology[86]. - A net benefit of $18 million was recognized in the first quarter of fiscal 2026 related to the collection of substitution drawback claims filed with the U.S. Government[89]. - The effective tax rate for the three months ended October 31, 2025, increased to 20.2% from 17.6% year-over-year, primarily due to unfavorable prior fiscal year true-ups[136]. Acquisitions and Divestitures - Brown-Forman acquired Gin Mare Brand, S.L.U. during fiscal 2023, which included adjustments for fair value changes to contingent consideration liabilities[83]. - The divestiture of Finlandia vodka and Sonoma-Cutrer wine businesses occurred in fiscal 2024, with related transition services agreements impacting financial results[84]. - The company ended its sales, marketing, and distribution relationship with Korbel Champagne Cellars effective June 30, 2025, impacting net sales and operating income for the non-comparable period[94]. Economic Environment - The company faced ongoing macroeconomic and geopolitical uncertainties, which negatively impacted consumer confidence and discretionary spending[106]. - The company anticipates organic net sales and organic operating income to decline in the low-single digit range for fiscal 2026[142]. - Estimated capital expenditures for fiscal 2026 have been updated to a range of $110 to $120 million, down from $125 to $135 million[141]. Financial Metrics and Adjustments - The company uses non-GAAP measures to provide a clearer understanding of financial performance, adjusting for acquisitions, divestitures, and foreign exchange[82]. - Organic net sales and other financial measures are adjusted to exclude the effects of currency fluctuations to provide a consistent basis for performance evaluation[89]. - Advertising expense was flat for the three months ended October 31, 2025, while SG&A expense was also flat, reflecting a balance between increased investment in campaigns and lower spending across the portfolio[133]. - Cash provided by operating activities for the six months ended October 31, 2025, was $292 million, an increase of $163 million from the same period last year[149]. - Cash used for financing activities during the six months ended October 31, 2025, was $399 million, compared to $129 million in the same prior-year period, reflecting increased net repayments of short-term borrowings and share repurchases[151].
Brown-Forman(BF_A) - 2026 Q2 - Quarterly Report