Beverage giant Brown-Forman, the parent company of Jack Daniel's Tennessee Whiskey and Woodford Reserve premium bourbon, continues to ride whiskey's wave of popularity in the United States and overseas.
"It's kind of bourbon's time right now," CEO Paul Varga said. "We've been waiting for it, to be honest, for a long time."
On Wednesday, the Louisville-based company released its earnings report for the third quarter that ended Jan. 31. Earnings rose 12 percent to $177 million, or 82 cents per diluted share, compared with $157 million, or 73 cents per diluted share, in the same period last year.
For the first nine months of the fiscal year, earnings were up 10 percent to $526 million, or $2.45 per diluted share, compared with $478 million or $2.22 per diluted share, the previous year.
The company raised its full-year outlook and now expects low double-digit growth in underlying operating income, and diluted earnings per share of $2.95 to $3.05.
Based on the results, shares of Brown-Forman rose almost 5 percent in midday trading.
Net sales rose 5 percent to $1.078 billion on the strength of worldwide popularity of the Jack Daniel's family of labels, including Jack Daniel's Tennessee Honey flavored whiskey, which passed the million-case mark in January, the company said.
Companywide, U.S. sales for the first nine months were up 3 percent.
Overseas, the company reported double-digit growth in China, Brazil, Russia, Thailand, Turkey and India, among other countries. Sales in China were helped by that country's crackdown on giving expensive gifts by being positioned in the premium but not ultra-premium price category, the company said.
Overall, sales of the Jack Daniel's family were up 6 percent, and Tennessee Honey underlying net sales were up 30 percent.
Net sales of Woodford Reserve's family of brands rose 27 percent. Old Forester, the company's founding brand, saw net sales growth of 25 percent; Early Times was down 9 percent.
Sales of Finlandia vodka, Herradura and El Jimador tequilas and Sonoma-Cutrer and Korbel wines also grew; Southern Comfort's brands declined.
"We delivered great top- and bottom-line results in the third quarter, continuing the momentum from the first half," Varga said in a statement. "We believe our top-tier performance was due primarily to the global strength of the Jack Daniel's trademark, disciplined innovation, our favorable skew to outperforming categories and price points, and our limited exposure to some of the emerging markets that have decelerated."
In a conference call Wednesday morning with stock analysts, Brown-Forman chief financial officer Jane Morreau said company executives were "very, very pleased to be able to report such terrific results."
She said the company is on track to deliver for the full year "high single-digit sales growth, albeit at the low end of the range."
Brown-Forman was particularly excited about the continued growth of its Jack Daniel's Tennessee Honey, which executives had predicted would slow.
Instead, carefully timed roll-outs overseas and continued ability to attract new customers in the United States have helped make it one of the few brands selling more than 1 million cases.
"That's rare space for brands that are $25 and above," Varga said.
Morreau said Brown-Forman also plans to get Woodford Reserve above 1 million cases.
The company began a $36 million expansion of the Woodford Reserve distillery last year that will double production capacity and add three new barrel warehouses in Woodford County.
Brown-Forman also is increasing capacity at its Jack Daniel's distillery in Tennessee. To meet the looming needs for more barrels, Brown-Forman will soon open a second cooperage in Decatur, Ala., Morreau said.
Jack Daniel's is about half of the company's sales, Varga said, but with a relatively small share of sales overseas, the company expects continued growth.
The fastest segment of whiskey sales growth has been at the high end. To preserve Jack Daniel's position on the pricing scale, Varga said, the company is weighing future price increases.
"We don't want Jack Daniel's to be seen as a mid-priced product," he said.
One concern for stock analysts: soft sales at bars and restaurants.
"On-premise" sales, which typically account for as much as a fourth of a brand's sales, were hurt by bad winter weather, the slowdown in consumer spending and high unemployment among younger legal drinkers, who are more likely to buy a bottle and hook up with friends via social media for their own gatherings.
Still, Woodford Reserve and Tennessee Honey continue to perform well on-premise, Morreau said.
Varga downplayed the significance of the slumping bar sales, citing continued strong overall sales of brown spirits.
American whiskey hits a "sweet spot" between the appetite for premium spirits of scotch and the mixability of vodka.
"Those are the world's two largest spirits categories, and American whiskey is poised to benefit from being at that intersection," Varga said.
He also said not to discount the value of the distilleries in selling product, something that vodka lacks.
"You actually have a real place where people can go and visit and meet the manufacturer who makes it," Varga said. "That deepens the sense of commitment and emotion, and the value equation consumer puts on" a brand.
Asked about rumors that Brown-Forman might be an attractive acquisition for a larger spirits company such as Bacardi, Varga said that the company's interest in remaining family-controlled is unchanged.
"We know what we're trying to do, and we welcome the momentum that exists right now," Varga said. "We're so well-positioned, to own Jack Daniel's with what we consider to be relatively modest market share, and so much runway for the company."