Company expects another year of strong growth
LOUISVILLE, Ky. (June 4, 2014) — Brown-Forman Corp. (NYSE:BFA) (NYSE:BFB) reported strong financial results for its fourth quarter and fiscal year ended April 30, 2014. For the full year, reported net sales increased 4 percent to $3,946 million (+6 percent on an underlying basis), reported operating income increased 8 percent to $971 million (+11 percent on an underlying basis), and diluted earnings per share increased 11 percent to $3.06 compared to $2.75 in the prior year period. Reported earnings per share were negatively impacted by a reduction in inventory levels primarily because of the route-to-consumer change in France that occurred on Jan. 1, 2014, but benefited from a lower effective tax rate.
For the fourth quarter, reported net sales increased 3 percent to $893 million (+3 percent on an underlying basis) and reported operating income increased 7 percent to $189 million (-2 percent on an underlying basis). Diluted earnings per share in the quarter increased 17 percent to $0.62, compared to $0.52 in the prior year period.
“We are pleased to report another fiscal year of excellent organic growth, particularly in light of the moderating growth rates of our global competitors. I believe that our leadership position in premium American whiskey, led by the one and only Jack Daniel’s trademark, and a very balanced geographic contribution, underpin the company’s differentiated performance,” said Paul Varga, the company’s chief executive officer. “We remain optimistic about the organic growth prospects for Brown-Forman, and our investment posture and fiscal 2015 earnings outlook reflect that optimism.”
Fiscal 2014 highlights
♦ Underlying net sales increased more than 6 percent on the strength of the company’s premium whiskey portfolio, as well as broad-based geographic gains
♦ Price/mix contributed three points to net sales growth and gross margin expanded 100bps
♦ Jack Daniel’s family of brands grew underlying net sales 8 percent
♦ Jack Daniel’s Tennessee Honey depleted one million cases; 20th largest brand over $25/bottle
♦ The company’s super and ultra-premium whiskey brands grew underlying net sales 19 percent
♦ Finlandia’s family of brands grew underlying net sales 4 percent
♦ Underlying operating income increased 11 percent, driven by top-line growth, gross margin expansion, and operating expense leverage through SG&A
♦ Returned $280 million to shareholders ($233 million in dividends, $47 million in share repurchases)
♦ As of April 30, 2014, Brown-Forman generated an ROIC4 of 22 percent, and delivered a 10-year TSR5 of 17 percent per year, more than double the S&P 500’s TSR of 8 percent per year
Balanced geographic growth
The company enjoyed solid gains in both the emerging markets and the developed world. Underlying net sales grew 4 percent (+4 percent reported) in the United States, 6 percent (+1 percent reported) in developed markets outside of the United States, and 9 percent (+8 percent reported) in the emerging markets. Other markets outside of the top ten representing 16 percent of net sales delivered an impressive 12 percent underlying net sales growth rate (+10 percent reported), and are becoming increasingly important contributors to the company’s growth.
America whiskey drove the top-line
The company’s underlying net sales growth of 6 percent was driven by the portfolio skew to the American whiskey category, and led by the Jack Daniel’s trademark, with 8 percent underlying net sales growth. Jack Daniel’s Tennessee Whiskey grew underlying net sales by 6 percent (5 percent reported) globally, with markets outside of the United States up 9 percent (7 percent reported). Notable growth drivers for the Jack Daniel’s trademark outside of the United States included France, Germany, Russia, Turkey, and Brazil.
Jack Daniel’s Tennessee Honey’s global underlying net sales grew 36 percent (+32 percent reported), despite a very challenging comparison against fiscal 2013 when Tennessee Honey’s net sales doubled. Underlying net sales in the United States grew by 22 percent (+17 percent reported) while underlying net sales outside of the United States jumped 62 percent (+62 percent reported) on the successful global roll-out of the brand, now distributed in the majority of Jack Daniel’s Tennessee Whiskey’s largest markets. Tennessee Honey also crossed the one million case milestone in the year, making it the 20th largest brand priced over $25 per 750ml bottle.
In addition to Jack Daniel’s Tennessee Whiskey, 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 19 percent (+16 percent reported) in the year. Woodford Reserve’s family delivered exceptional underlying net sales growth, up 26 percent (+25 percent reported). Depletions for Old Forester, the company’s founding brand, were up 7 percent and underlying net sales jumped 16 percent (+28 percent reported), as significant demand for the brand in the on-premise drove results. In the aggregate, these premium whiskey brands depleted well over one million cases.
Finlandia vodka’s family of brands grew underlying net sales by 4 percent. Premiumization trends in Russia, as well as the combination of volume growth and higher pricing in Poland drove growth.
The Casa Herradura family of tequila brands experienced 10 percent underlying net sales growth (+4 percent reported) in the United States, with Herradura and el Jimador growing underlying net sales by 12 percent (+5 percent reported) and 9 percent (+4 percent reported), respectively in this market. These positive results were more than offset by extremely challenging conditions in the brand family’s home market, Mexico, where underlying net sales declines of 8 percent (-9 percent reported) were exacerbated by first quarter destocking of New Mix. In the aggregate, the family’s global underlying net sales declined 1 percent (-4 percent reported), but trends improved throughout the year, and the family was roughly flat over the last nine months of the fiscal year.
Southern Comfort’s family of brands grew underlying net sales by 2 percent outside of the United States, as the parent brand grew in the United Kingdom. Globally, underlying net sales decreased 2 percent as sales declines in the United States were driven by continued weakness in the on-premise.