By Andy Young 

A slip in sales in its latest quarter has seen Brown-Forman reduce its earnings outlook for the year. The company said that a slowing in its emerging markets and the strong US dollar had also caused the cut in its forecast.

In reporting the results for its third quarter of the 2016 financial year, ended 31 January, 2016, Brown-Forman reported a net sales decline of one per cent to US$1083 million but an operating income increase of two per cent to $278m.

For the first nine months of its financial year the company reported a net sales decrease of two per cent and an operating income increase of two percent. The company added that its year-to-date reported net sales growth was adversely impacted by eight percentage points due to foreign exchange.

Paul Varga, the company’s Chief Executive Officer said: “Against a backdrop of deteriorating economic conditions in emerging markets, weakness in the global travel retail channel, and headwinds from a strengthening dollar, we had another solid quarter of underlying growth, led by the Jack Daniel’s family and our American whiskey brands.”

He added: “The organic growth of Jack Daniel’s and our premium brand portfolio against a diversified geographic opportunity, an ever-improving portfolio positioned for sustained growth, our efficient use of capital, and the consistent return of capital to shareholders remain key ingredients in Brown-Forman’s value proposition.”

The company added: "The developed markets outside of the United States maintained their momentum, growing underlying net sales 5 per cent (-4 per cent reported). The United Kingdom, Australia, France, Canada, and Spain each delivered solid gains in underlying net sales. Underlying net sales growth was flat in Japan and up slightly in Germany, where results were negatively impacted by trading patterns."

The company’s underlying net sales growth was led by the Jack Daniel’s family, up 7 per cent (-1 per cent reported). Jack Daniel’s Tennessee Honey grew underlying sales by 11 per cent (+2 per cent reported), powered by strong gains in markets outside of the United States. Jack Daniel’s Tennessee Fire contributed two percentage points to the family’s year-to-date underlying net sales growth. Jack Daniel’s RTD/RTP business also delivered solid results, with underlying net sales growth of 4 per cent (-9 per cent reported).

Brown-Forman’s portfolio of super and ultra-premium whiskey brands, including Woodford Reserve and Woodford Reserve Double Oaked, Jack Daniel’s Single Barrel, Gentleman Jack, Sinatra Select, No. 27 Gold, and Collingwood, collectively grew underlying net sales by mid-teens. Old Forester’s underlying net sales grew double-digits, and the Woodford Reserve family of brands grew underlying net sales 29 per cent (+30 per cent reported).

In terms of its outlook for the rest of the year and beyond the company said that the uncertainty surrounding the global economic environment makes it difficult to predict future results. However, assuming no further deterioration in the global economy and emerging markets in particular, the company expects growth to be driven by global demand for authentic American whiskey brands, consumer interest in flavoured whiskey, and premiumisation trends.

The Shout Team

The leading online news service for Australia's beer, wine, spirits and hospitality industries.

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