Brown-Forman Q1 Earnings Miss Estimates, Sales Beat on Portfolio Gains

Core Insights - Brown-Forman Corporation (BF.B) reported mixed first-quarter fiscal 2026 results, with net sales exceeding estimates but earnings per share (EPS) falling short [1][3][6] - The company has taken decisive actions to strengthen its business amid challenging conditions, focusing on innovation and consumer strategies to maintain growth [1][2][19] Financial Performance - EPS for the fiscal first quarter was 36 cents, down 13% year over year, missing the Zacks Consensus Estimate of 37 cents [3][6] - Net sales reached $924 million, a 3% decline year over year, but surpassed the Zacks Consensus Estimate of $911 million; on an organic basis, net sales increased by 1% [3][6] - Gross profit was $552 million, a 2% decline year over year, while gross margin improved by 40 basis points to 59.8% due to acquisitions and divestitures [4][6] - Operating income decreased by 7% year over year to $260 million, with an operating margin of 28.2%, down 140 basis points from the previous year [8] Market Performance - In the U.S., net sales fell 8% year over year, impacted by the absence of the prior-year Sonoma-Cutrer TSA and lower volumes of key brands [9] - Developed international markets saw an 8% decline in net sales, primarily due to reduced demand and geopolitical pressures [10] - Emerging markets experienced a 20% increase in net sales, driven by strong growth in the Jack Daniel's brand, particularly in Brazil and Türkiye [11] - The Travel Retail channel reported an 8% increase in net sales, supported by higher volumes of Jack Daniel's Tennessee Whiskey [12] Brand Performance - Whiskey product sales remained flat year over year, with strong initial shipments of Jack Daniel's Tennessee Blackberry offset by declines in other key products [13] - Tequila portfolio sales fell 1% year over year, with Herradura brand sales dropping significantly, while el Jimador saw a 14% increase [14] - The Ready-to-Drink (RTD) category grew by 6% year over year, with New Mix experiencing a notable 26% increase [15] - The rest of the portfolio saw a significant decline of 27% year over year, largely due to the absence of Sonoma-Cutrer and Finlandia TSAs [16] Financial Health - As of the end of the first quarter, the company had cash and cash equivalents of $471 million and long-term debt of $2.1 billion, with total shareholders' equity at $3.99 billion [17] Outlook - For fiscal 2026, the company anticipates continued challenges due to macroeconomic and geopolitical volatility, projecting a low-single digit decline in organic net sales and operating income [18][20]