Brown-Forman earnings up 19 percent, partly fueled by Woodford Reserve

jpatton1@herald-leader.comDecember 4, 2013 

Freshly filled barrels of Woodford Reserve were moved to a storage warehouse at the Woodford Reserve Distillery near Versailles. Brown-Forman has announced a major expansion of production for the bourbon.

HERALD-LEADER Buy Photo

Louisville-based Brown-Forman reported Wednesday a 19 percent increase in second-quarter earnings, riding strong sales of flagship brand Jack Daniel's, its spin-off Jack Daniel's Tennessee Honey and premium bourbon Woodford Reserve.

"We've been pleased by this cold spell, so we can have people sipping on our bourbon," CEO Paul Varga said. The short holiday season is unlikely to affect overall sales, which continue to be strong at the stores but weaker at bars and restaurants, Varga said.

Sales for the quarter that ended Oct. 31 were up 6 percent, to $1.08 billion; for the first six months of the fiscal year, sales grew 5 percent, based on constant currency rates.

Sales of the Jack Daniel's family of brands have risen 8 percent globally in the first six months. El Jimador tequila, Finlandia vodka and Southern Comfort all slipped, Brown-Forman reported.

"Fueled by the Jack Daniel's trademark, the company's second-quarter and first-half results were very strong. We continued to generate an excellent balance of geographic growth, including strong growth in the emerging markets," Varga said in a news release. "We are particularly pleased with Brown-Forman's results in light of recent industry commentary around a slowdown in global spirits momentum, and we are reaffirming our expectations for excellent full-year growth in underlying operating income."

Softening bar and restaurant liquor sales contributed to the lackluster sales of Southern Comfort, Don Berg said in his last conference call as chief financial officer. Berg is to hand the reins over to Jane Morreau at the end of January.

Jack Daniel's continued to provide many of the bright spots, particularly with its growing family of line extensions.

"Jack Daniel's Tennessee Honey is now one of our largest stand-alone brands, approaching 1 million cases" in sales, Berg said. Underlying net sales grew 30 percent in first half, but more moderate rates of growth are expected in next year as France is the only remaining major market in which to launch, he said.

Winter Jack, a "ready-to-pour" hybrid liqueur spiced with apple cider and cinnamon, did well enough in Germany to test in the United States last year and has been launched in 30 states, Berg said.

And another lucrative revenue stream — duty-free sales — welcomed an addition: a maple-barrel-finished Jack Daniel's No. 27 Gold Tennessee Whiskey, available only in Singapore so far.

Travel retail now accounts for 4 percent of total revenues for Brown-Forman, Berg said.

"It's a great place for us to innovate and launch premium product offering, such as Sinatra Select," Berg said. Jack Daniel's Sinatra Select, which retails for about $199 a bottle, launched in duty-free shops last year and will roll out to Chicago, Las Vegas, Los Angeles, Miami, New York, San Francisco, New Jersey and Tennessee soon.

Another hot spot: Versailles-based Woodford Reserve, which grew by 27 percent. "With only 15 percent of sales from outside the U.S., the global growth potential for this brand is enormous," Berg said.

Brown-Forman has announced major expansions of production capacity for Jack Daniel's and Woodford Reserve.

Varga said Wednesday that he would not rule out introducing a totally new brand to capitalize on the current popularity of American whiskey but said that Woodford has already added its own premium extension, Doubled Oaked, which he said has done well.

Earnings for the quarter were up 19 percent, to $206 million or 96 cents per share, compared to $173 million or 80 cents per share for the same quarter of 2012.

Analysts surveyed by FactSet expected earnings of 91 cents per share on net sales of $1.11 billion, according to the Associated Press.

For the first half of the fiscal year, Brown-Forman earnings were up 9 percent, to $349 million or $1.62 per share, compared to $320 million or $1.49 per share in the same period last year.

The company is reaffirming its growth outlook for fiscal 2014. For the full year, the company anticipates high-single digit growth in underlying sales and a 9 to 11 percent increase in underlying operating income, which would result in diluted earnings per share of $2.80 to $3.

Janet Patton: (859) 231-3264. Twitter: @janetpattonhl.

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