US business is improving “slowly”, Brown-Forman CEO says

Brown-Forman's business in the US is improving "slowly", which has, in part, boosted the group's outlook on its profits, outgoing CEO Lawson Whiting has said.

Alongside the publication of its first-quarter results yesterday (3 September), the Jack Daniel's maker reaffirmed its full-year outlook, which includes a forecast for a 3-5% decline in organic operating income.

However, CFO Jim Peters said Brown-Forman had "increased confidence that results will trend toward the more favourable end of the range", based on its first-quarter figures and "trends we're seeing across the business", he said.

Prodded on Brown-Forman's underlying performance in the US, Whiting, who is soon to retire from the group, said: "I think the US business in aggregate is improving, slowly."

He said the business "bottomed out" around December to January. Pointing to NABCA and Nielsen data, he also indicated there were signs of "improvement".

Later in the call, Whiting said: "If the TDS [total distilled spirits] in the US continues to improve bit by bit, and it has - it has been pretty steady over the last six, eight months... I think that helps the confidence".

For the three months ended 31 July, Bronw-Forman's total net sales were down 1% at $911m, attributed to the end of its distribution and marketing agreement with Korbel Champagne Cellars last year and a drop in sales of used barrels and Tequila.

Net sales in the US declined 3% on a reported basis and were flat organically, driven in part by the end of the Korbel tie-up as well as "an estimated net decrease in distributor inventories".

Gross profit was also down 1% in the period at $549m, while operating income declined 3% to $252m. Net income was up 3% in the quarter to $176m.

Peters said that the group's "actions" to offset costs were "delivering probably at the higher end of the range of what we expect and we are seeing some of those results come sooner".

He added: "While we do expect our gross margins to feel pressure throughout the year due to the timing of how some of the whiskey flows out and all that, we still are actually seeing - what I would say is based on our own actions - some more favourable things within the overall cost of goods environment."

Whiting also told analysts he expected declining barrel sales to be less of a pressure on the results of the business in the future.

Brown-Forman has seen barrel sales drop from over $100m in its 2024 financial year to around $30m last year, with the expectation the business will also see "a pretty significant" drop for that measure again in its 2027 fiscal year.