Brown-Forman annual sales down 2 percent to just over $4 billion

Woodford Reserve is one of four bourbon distilleries within a 40-minute drive of downtown Lexington.
Woodford Reserve is one of four bourbon distilleries within a 40-minute drive of downtown Lexington. Herald-Leader

Brown-Forman’s annual sales dropped 2 percent, to just over $4 billion, largely due to adverse foreign exchange rates, after three straight quarters of slipping net sales for the Louisville-based whiskey maker.

The parent of Jack Daniel’s Tennessee Whiskey reported fourth-quarter and full-year earnings Wednesday morning. For the fourth quarter, Brown-Forman reported that net sales were down 1 percent to $933 million, compared with the same quarter of the previous year. Excluding factors including exchange rates, the company said, underlying sales were up 4 percent.

Earnings for the fourth quarter were up 272 percent to $522 million, or $2.60 per diluted share, a 291 percent gain, compared to last year.

Excluding gains from the sale of Southern Comfort and Tuaca for $543 million, operating income was up 10 percent.

For the year, Brown-Forman reported sales were down by $85 million; underlying sales were up 5 percent, due in part to higher prices, but foreign exchange rates hurt net sales by 6 percent, the company said. The company reported earnings for the full year of almost $1.07 billion, up 56 percent, or $5.22 per diluted share, a 63 percent gain. Excluding the impact of the sale, earnings were up 8 percent, to $3.46.

CEO Paul Varga called it “another successful year at Brown-Forman.”

For fiscal 2017, Brown-Forman forecast earnings per share of $3.42 to $3.62, with underlying net sales growth of 4 to 6 percent, led by its premium American whiskey brands.

According to the company, yearly sales of the Jack Daniel’s family of brands grew 6 percent on an underlying basis, with Tennessee Honey up 9 percent. In the United States, sales of Tennessee Honey and Tennessee Fire combined topped 1 million cases and nearly 2 billion cases globally.

Tennessee Fire contributed 1 percent of the company’s underlying growth, according to the news release. In fiscal 2017, Brown-Forman will roll out Tennessee Fire to more overseas markets, including the U.K., Germany and Australia.

Underlying sales of premium bourbon Woodford Reserve rose 25 percent, while sales of Old Forester, the company’s oldest brand, rose 48 percent. Tequilas Herradura and el Jimador also grew by combined high-teens in the United States, which is the company’s biggest market with 46 percent of all sales.

Outside the United States, overall Brown-Forman sales were up, with the exception of Russia, which dropped 17 percent, Indonesia and Italy. Sales of Finlandia vodka were particularly hurt by the economic slowdown in Russia.

Emerging markets experienced a slowdown, particularly in the second half of the year.

In a conference call with analysts, Brown-Forman CFO Jane Morreau said that portfolio realignment in 2016 will help the company capitalize on the shift by consumers from white to brown spirits, particularly American whiskey.

On June 1, the company completed the purchase of three Scotch distilleries — The GlenDronach, BenRiach, and Glenglassaugh — for $408 million. There have been reports that Brown-Forman is considering a sale of Finlandia vodka.

Woodford Reserve, which just topped sales of 500,000 cases this year, will be the template for what Brown-Forman hopes to do with the newly acquired single malt brands as well as Slane Irish whiskey. The company is building a $50 million distillery at historic Slane Castle, 30 miles north of Dublin.

“Slane Irish Whiskey can become the next Woodford-like driver of growth,” Morreau said.

Brown-Forman also will be launching a global campaign to celebrate the 150th anniversary of Jack Daniel’s Tennessee Whiskey, Morreau said, which will include a special campaign called the “Jack Attack,” a global barrel hunt, a large celebration at the distillery in Lynchburg, Tenn., and pop-up events in major cities.

There will be special releases, including a $100 limited edition product and bottle related to the anniversary. He did not reveal more details, Varga said.

The push on anniversary is expected to have an impact on overall sales of the company’s flagship brand, which is the biggest-selling American whiskey in the world.

“Can you get another point of growth out of Jack Daniel’s Black Label? I sure think so,” Varga said.