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BF

BROWN FORMAN CORP (BF-A)·Q1 2026 Earnings Summary

Executive Summary

  • Q1 FY2026 net sales were $0.924B, down 2.8% reported but up 1% organic; diluted EPS was $0.36, down 13% YoY. Gross margin expanded 40 bps to 59.8%, while operating margin fell 140 bps to 28.2% on FX headwinds and restructuring charges .
  • Versus S&P Global consensus, revenue beat ($924M vs $910M*) while EPS modestly missed ($0.36 vs $0.367*); 12 and 15 estimates respectively. Management reaffirmed FY26 guidance for low-single-digit organic declines in both net sales and operating income, 21–23% tax rate, and $125–$135M capex . Values retrieved from S&P Global*.
  • What worked: Emerging markets (+25% organic) and Travel Retail (+7% organic) offset weakness in the U.S. (-2% organic) and Developed International (-9% organic); New Mix RTD grew strongly (+36% organic) and JD Apple rose (+16% organic) .
  • What didn’t: U.S. and Canada (Canada -59% organic) softness, competitive tequila (Herradura -15% organic), and -44% non‑branded/bulk sales on lower used barrel sales. FX and a $19M pension settlement charge pressured EPS despite an $18M drawback claims benefit .

What Went Well and What Went Wrong

What Went Well

  • Organic growth resilience: Organic net sales +1% with emerging markets (+25% organic) and Travel Retail (+7% organic) outpacing U.S./Developed softness .
  • Mix and innovation: New Mix RTD +36% organic; JD Tennessee Apple +16% organic; strong initial shipments of JD Tennessee Blackberry ahead of launch .
  • Cost discipline and margin: Gross margin expanded 40 bps to 59.8%; advertising (-3% organic) and SG&A (-7% organic) reduced while maintaining brand support. CEO: “Superior innovation and bold route‑to‑consumer strategies…positioned us to deliver resilient results…We are pleased to reaffirm our full‑year outlook” .

What Went Wrong

  • Core market pressure: U.S. organic net sales -2% with lower JD Tennessee Whiskey and Herradura; Developed International organic -9% amid macro/geopolitical uncertainty and Canada retail disruptions (absence of American‑made alcohol on most provincial shelves) .
  • Category headwinds: Herradura -15% organic amid competitive tequila dynamics in the U.S.; Jack Daniel’s Tennessee Whiskey -4% reported (-4% organic) on lower volumes in U.S. and Germany .
  • Non‑branded decline and FX: Non‑branded/bulk net sales -44% on lower used barrel sales; FX was a primary driver of the 7% operating income decline and 140 bps operating margin compression to 28.2% .

Financial Results

Core P&L vs Prior Periods (oldest → newest)

MetricQ3 FY2025Q4 FY2025Q1 FY2026
Revenue ($USD Millions)$1,035 $894 $924
Diluted EPS ($)$0.57 $0.31 $0.36
Gross Margin (%)59.8% 57.3% 59.8%
Operating Margin (%)27.1% 22.9% 28.2%

Versus S&P Global Consensus (Q1 FY2026)

MetricConsensusActualSurprise
Revenue ($USD Millions)$910.34*$924 +$13.66M (Beat)
Diluted EPS ($)$0.3668*$0.36 -$0.0068 (Miss)
# of Estimates (Rev / EPS)12* / 15*——

Values retrieved from S&P Global*.

Geographic Net Sales (Q1 FY2026, YoY % Change)

GeographyReportedOrganic
United States-8% -2%
Developed International-8% -9%
• Germany-10% -13%
• United Kingdom-16% -16%
• Canada-62% -59%
Emerging+20% +25%
• Brazil+31% +30%
• Türkiye+11% +39%
Travel Retail+8% +7%

Portfolio/Brand Highlights (Q1 FY2026, YoY)

Category/BrandDepletions (M 9L)Depl. YoYShipments (M 9L)Ship YoYNet Sales ReportedNet Sales Organic
Jack Daniel’s Tennessee Whiskey (JDTW)3.2 -6% 3.2 -4% -4% -4%
JD Tennessee Apple (JDTA)0.3 +6% 0.3 +20% +18% +16%
Gentleman Jack0.2 +7% 0.2 +6% +8% +11%
JD RTD/RTP2.5 -2% 2.5 -3% -2% -1%
New Mix3.0 +28% 3.0 +28% +26% +36%
Herradura0.1 -8% 0.1 -14% -16% -15%
el Jimador0.3 -4% 0.4 +13% +14% +16%
Non‑branded & bulkNANANANA-44% -44%
Total Portfolio11.1 +3% 11.3 +6% -3% +1%

Other P&L/Balance Sheet & Cash Flow (Q1 FY2026)

  • Gross profit -2% YoY; advertising -4%; SG&A -6%; operating income -7% (organic +2%). Restructuring charges $12M; $19M non‑operating pension settlement charge; $18M benefit from substitution drawback claims .
  • Cash from operations $160M vs $17M prior year; cash & equivalents $471M at quarter end .

Guidance Changes

MetricPeriodPrevious Guidance (6/5/25)Current Guidance (8/28/25)Change
Organic Net SalesFY2026Low-single-digit decline Low-single-digit decline (reiterated) Maintained
Organic Operating IncomeFY2026Low-single-digit decline Low-single-digit decline (reiterated) Maintained
Effective Tax RateFY2026~21%–23% ~21%–23% (reiterated) Maintained
Capital ExpendituresFY2026$125–$135M $125–$135M (reiterated) Maintained
DividendQuarterly$0.2265 declared (7/24/25) $0.2265 payable 10/1/25 Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 FY2025; Q4 FY2025)Current Period (Q1 FY2026)Trend
U.S. demand and distributionU.S. softness; restructuring underway; preparing route-to-consumer evolution U.S. -2% organic; inventory build ahead of Aug 1 distributor transitions in 13 states; JD Blackberry pre-launch shipments Transition in progress; near-term noise, positioning for coverage gains
Emerging marketsMixed but improving YTD; Brazil/Türkiye strength +25% organic; broad JD family growth; some distributor inventory builds Strengthening
Travel Retail-5% organic FY2025 +7% organic on JD and Gin Mare, timing and FX Improving
Tequila categoryCompetitive U.S., Mexico softness (FY2025) Herradura -15% organic; el Jimador +16% organic (bottle redesign, innovation) Divergent brand trajectories
Canada/regulatoryNot a major prior focusMost provinces: absence of American-made alcohol on shelves; significant Canada decline (-59% organic) New headwind; policy/tariff risk referenced in call coverage
Non-branded/used barrelsFY26 outlook noted lower non-branded sales Non‑branded & bulk -44% on used barrels Ongoing pressure
FXNoted FY2025 margin headwind Primary driver of operating income decline YoY Continuing headwind

Management Commentary

  • CEO Lawson Whiting: “Superior innovation and bold route‑to‑consumer strategies…have positioned us to deliver resilient results…We are pleased to reaffirm our full‑year outlook and remain confident in our ability to create long-term value for shareholders” .
  • On operating drivers: Gross margin expanded 40 bps to 59.8% on portfolio actions; operating income fell 7% primarily from unfavorable FX, lapping a prior-year franchise tax refund, and restructuring costs, partly offset by substitution drawback claims .
  • Leadership update: CFO Leanne Cunningham announced intent to retire effective May 1, 2026; succession process underway with targeted appointment by year‑end 2025 for a seamless transition .

Q&A Highlights

  • Guidance reaffirmed despite macro/FX, lower used barrel sales, and Canadian retail disruptions; management reiterated low‑single‑digit organic declines for both net sales and operating income and the 21–23% tax rate .
  • U.S. transition: Inventory builds ahead of Aug 1 distributor changes and pre‑launch shipments (JD Tennessee Blackberry) affected U.S. shipments timing; expected to improve route‑to‑consumer execution and coverage going forward .
  • Canada/tariffs: Call coverage referenced Canadian tariff/regulatory impacts contributing to the absence of American-made alcohol on shelves in most provinces, weighing Developed International results .
  • Used barrels: Lower used barrel sales drove the -44% non‑branded/bulk decline; a known FY26 headwind reiterated in outlook .

Estimates Context

  • Q1 FY2026 results vs S&P Global consensus: revenue beat ($924M vs $910.34M*), EPS slight miss ($0.36 vs $0.3668*); 12 revenue and 15 EPS estimates*. Management’s reaffirmed FY26 outlook suggests estimates may need modest EPS trimming for FX and non‑operating pension charge, with revenue largely aligned given organic trends and the distribution transition . Values retrieved from S&P Global*.

Key Takeaways for Investors

  • Organic growth durability with mix: Emerging markets and Travel Retail strength plus RTD innovation offset U.S./Developed softness; watch sustainability of New Mix and JD flavored growth .
  • Near-term U.S. noise from distributor transitions should normalize; medium-term, increased dedicated coverage and updated margin structures could enhance execution and mix .
  • Expect continued pressure from non‑branded/used barrels and FX; margin management will rely on pricing/mix and disciplined A&P/SG&A .
  • Canadian regulatory/tariff environment is a discrete risk; Developed International remains sensitive to macro/geopolitical conditions .
  • FY26 guidance held; with revenue above and EPS slightly below consensus in Q1, Street may fine-tune EPS for FX/non‑operating items while keeping top-line near current trajectory*.
  • Leadership transition risk appears low with long runway; succession plan targeted by year‑end 2025 for CFO .
  • Trading setup: Reaffirmed outlook and revenue beat provide support; stock narrative hinges on evidence of U.S. reacceleration post-transition, tequila stabilization (Herradura), and easing of Canadian/FX headwinds in coming quarters .

Notes and sources:

  • Q1 FY2026 press release and detailed schedules: .
  • 8-K including Item 2.02 and exhibit: .
  • Prior quarters: Q3 FY2025 release (Jan 31, 2025): ; Q4 FY2025 release (Apr 30, 2025): .
  • CFO retirement: .
  • Call coverage/summary (external): .
  • Estimates: S&P Global consensus via tool (asterisked values).