Brown Forman beats estimates on earnings and sales in fourth quarter
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Brown Forman beats estimates on earnings and sales in fourth quarter

Luxury drinks company Brown Forman has posted its fourth straight quarter of earnings and sales beats, this time for the final quarter of fiscal 2018. Adjusted earnings came in at 23¢ per share - this is a decline of 24% year over year, but an expected one: the company had previously warned that the creation of a $70 million charitable foundation as well as “phasing of operating expenses” would impact earnings. As it was, earnings beat consensus estimates of 22¢ per share.

Net sales rose by 6% year over year to $733 million (after the deduction of excise taxes). On an underlying basis, and adjusting for negative currency impacts among other things, that becomes a 5% increase from the same period in the previous year. This is the seventh straight quarter that Brown Forman has seen growth, but it fell short of analysts expectations for $747.4 million in net sales.

Despite this shortfall, there’s little doubt that the company’s sales performance is robust, and the source of its strength is continued high demand for its Jack Daniels brand and portfolio of American whiskeys.

Gross profit increased by almost 7% from the year-ago quarter to $512 million, and gross margin increased to 69.8% (that’s a 60bp rise). However, the company’s operating income declined 32% to $145 million in reflection of higher expenses through the quarter.

Looking to the future, Brown Forman struck a positive tone. It is confident of its ability to capitalise on American whiskeys, and is predicting earnings per share between $1.75 and $1.85 for fiscal 2019. That’s an increase of 18% to 25%, year over year. Brown Forman also says it expects to see underlying sales growth between 6% and 7% for the coming year.

Disclosure

Dominion holds Brown Forman in its Global Trends Luxury Fund.


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