Brown-Forman Announces Corporation (NYSE: BFA, BFB) has released its financial results for the third quarter and nine-month period ending January 31, 2025. The report provides insight into the company’s performance across various business segments and global markets, reflecting both challenges and growth opportunities.
Third Quarter Performance
For the third quarter of fiscal 2025, Brown-Forman reported net sales of $1.0 billion, reflecting a 3% decrease compared to the same period in the previous year. However, on an organic basis, net sales grew by 6%. Reported operating income for the quarter fell by 25% to $280 million, though it saw an increase of 23% on an organic basis. Diluted earnings per share (EPS) dropped by 5% to $0.57.
Year-to-Date Performance
For the nine-month period of fiscal 2025, Brown-Forman reported net sales of $3.1 billion, representing a 4% decline from the prior-year period. On an organic basis, net sales rose by 2%. Reported operating income decreased by 13% to $902 million, while organic operating income grew by 5%. Year-to-date diluted EPS fell by 4% to $1.53.
Despite these fluctuations, the company remains confident in its growth outlook. “We are pleased to reaffirm our outlook for organic top and bottom line growth in fiscal 2025 and are proud of our team’s ability to deliver industry-leading growth in this challenging environment,” said Lawson Whiting, Brown-Forman’s President and Chief Executive Officer. “While we anticipate continued uncertainty and headwinds in the external environment, we are also confident that we have the right people, brands, and strategy in place to take advantage of ongoing growth opportunities.”
Key Factors Affecting Year-to-Date Fiscal 2025 Results
- Net Sales Declines and Market Conditions
- The company’s overall net sales declines were primarily driven by the divestitures of Finlandia and Sonoma-Cutrer.
- Across all geographic regions, net sales declined, though the United States and Developed International markets showed sequential improvement.
- Gross profit declined by 6% overall, with a 1% decline on an organic basis. The company attributed this to increased costs and negative foreign exchange effects, partially offset by a favorable price/mix impact.
- Operating expenses decreased by 8% (6% organic).
- The company recognized a $78 million gain from the sale of its investment in The Duckhorn Portfolio, Inc. (Duckhorn), contributing $0.14 per share to diluted earnings per share.
- Brand Performance Highlights
- Whiskey Portfolio: Net sales remained flat (+2% organic), though sequential improvement was noted. Growth in Woodford Reserve and Jack Daniel’s Tennessee Whiskey was offset by foreign exchange losses and declines in super-premium Jack Daniel’s expressions, such as Jack Daniel’s Single Barrel and other special releases. The declines in these premium expressions were partly due to strong prior-year performance, which included several product launches.
- Tequila Portfolio: Net sales for Brown-Forman’s tequila brands fell by 15% (-13% organic). The competitive environment in the United States and challenging macroeconomic conditions in Mexico significantly impacted sales. Specifically, el Jimador’s net sales dropped by 13% (-11% organic) due to lower volumes in both the U.S. and Mexico, partially offset by higher U.S. prices. Herradura’s net sales also fell by 13% (-11% organic), primarily due to declining volumes in Mexico.
- Ready-to-Drink (RTD) Portfolio: Net sales decreased by 4%, but grew by 6% on an organic basis. The Jack Daniel’s RTD/RTP portfolio experienced a 7% decline (+3% organic), largely driven by changes in the Jack Daniel’s Country Cocktails business model. However, New Mix showed continued strength, posting a 2% net sales increase (+13% organic), benefiting from higher volumes in Mexico, though partially offset by foreign exchange impacts.
- Other Portfolio Brands: Net sales for the remaining brands fell by 31% but remained flat on an organic basis. This was due to the divestitures of Finlandia and Sonoma-Cutrer, along with lower volumes of Korbel California Champagnes in the U.S. The decline was partially offset by positive contributions from Diplomático and Gin Mare. Distributor inventory increases positively impacted net sales.
- Market-Specific Performance
- United States: Net sales declined by 5% (-1% organic), though sequential improvements were noted. The decline was primarily driven by the Sonoma-Cutrer divestiture, reduced volumes of Korbel California Champagnes and Jack Daniel’s Tennessee Whiskey, and the effects of changes in the Jack Daniel’s Country Cocktails business model. Growth in Woodford Reserve partially offset these declines.
- Developed International Markets: Net sales decreased by 5% (-1% organic). Industry trends remained soft, with sales declines driven by the absence of the Finlandia brand, unfavorable foreign exchange rates, and lower volumes in South Korea, Germany, and the United Kingdom. However, Jack Daniel’s Tennessee Whiskey saw higher sales in Japan, benefiting from changes in distributor ordering patterns.
- Emerging Markets: Net sales declined by 4% (+8% organic), lapping a strong prior-year period of double-digit growth. Declines were attributed to the Finlandia divestiture, foreign exchange headwinds, and weaker tequila sales in Mexico. Growth in the Jack Daniel’s family of brands in Türkiye, Brazil, and the United Arab Emirates helped offset some losses.
- Travel Retail: Sales declined by 5% (-2% organic), primarily due to lower sales of super-premium Jack Daniel’s expressions and the Finlandia divestiture. However, growth in Diplomático provided some positive momentum.
Additional Financial Highlights
- Gross profit fell by 6% (-1% organic), primarily due to brand divestitures and foreign exchange headwinds. Gross margin contracted by 150 basis points to 59.4% due to higher costs and currency fluctuations.
- Advertising expenses declined by 9% (-6% organic), mainly due to the timing of marketing investments for Jack Daniel’s Tennessee Whiskey and Jack Daniel’s Tennessee Apple, as well as the prior-year launch of Jack Daniel’s and Coca-Cola RTD in the U.S.
- SG&A expenses dropped by 7% (-4% organic), reflecting lower compensation and benefits costs.
- The company incurred $33 million in restructuring and other charges, including costs related to a workforce reduction, the announced closure of the Brown-Forman Cooperage in Louisville, and early retirement benefits for eligible U.S. employees.
- Operating income declined by 13% (+5% organic), with the operating margin decreasing by 300 basis points to 29.3% due to gross margin pressure, the absence of the Finlandia divestiture gain, and restructuring charges.
- Brown-Forman recorded a $78 million gain from the sale of its 21.4% stake in Duckhorn, contributing $0.14 to diluted earnings per share.
- Diluted EPS fell by $0.06, primarily due to lower operating income, partially offset by gains from the Duckhorn sale and a lower effective tax rate.
Dividend and Financial Stewardship
On February 20, 2025, Brown-Forman’s Board of Directors declared a quarterly cash dividend of $0.2265 per share on Class A and Class B Common Stock. The dividend is payable on April 1, 2025, to stockholders of record as of March 7, 2025. Brown-Forman, a member of the S&P 500 Dividend Aristocrats Index, has paid regular dividends for 81 consecutive years and increased its dividend for 41 consecutive years.
