Brown-Forman cut net sales forecast for 2024 as cost-conscious consumers looked at cheaper alternatives to the whisky-maker's more pricier brands in the United States.
Rising prices of raw materials such as wood and grains have forced most of the alcoholic beverage sector, including the Jack Daniel's whisky maker, to bump up product prices in previous years.
However, inflation-hit consumers have been deal-hunting and shifting away from pricier non-essentials to stretch their household budgets.
The company, which also makes El Jimador tequilas, now expects annual organic net sales to grow between 3% to 5%, compared with a rise of 5% to 7% expected earlier.
Lawson Whiting, president and chief executive officer of Brown-Forman stated, “Our first half fiscal 2024 results illustrate Brown-Forman’s ability to deliver continued growth, even amid dynamic market conditions and very strong comparisons from the prior-year period.
“While we grew at a slower pace than anticipated, we delivered strong gross margin expansion and continued to invest strongly behind our brands. We continue to believe our premium portfolio and broad geographic footprint will position us for accelerated growth in the second half of the fiscal year.”
Quarterly Highlights
In the second quarter, depletions, which is stock sold to wholesalers or retailers, fell across its portfolio of spirits, with an overall decline of 2% year-over-year.
Higher costs of agave, a crucial raw material for tequilas, wood, and glass, have put sustained pressure on margins for the whisky maker, offsetting gains made from a letup in supply chain costs.
The company also lowered its forecast for organic operating income growth to 4% to 6% from its earlier growth target of between 6% and 8%.
Net sales for the quarter ended 31 October rose 1% to $1.11 billion (€1.03 billion), missing analysts' average estimate of $1.15 billion (€1.07 billion), as per LSEG data.
Excluding items, the company earned 50 cents per share, compared with estimates of a profit of 51 cents per share.
News by Reuters, additional reporting by ESM.
