Executive Summary

Q1 FY2025 net sales declined 8% to $951M reported (-4% organic), operating income fell 14% to $281M, and diluted EPS decreased 14% to $0.41, driven by shipment timing, input cost fluctuations, high inventories, FX, and transition service agreements post divestitures .
Management reaffirmed FY2025 guidance: organic net sales growth 2–4%, organic operating income growth 2–4%, effective tax rate ~21–23%, and capex $195–$205M, signaling confidence despite near-term pressures .
Gross margin contracted 330 bps to 59.4% and operating margin fell 200 bps to 29.6% due to input cost timing, elevated inventory levels, FX, and TSAs related to Finlandia and Sonoma-Cutrer, partially offset by price/mix and JDCC impact .
Category softness concentrated in Jack Daniel’s Tennessee Whiskey, Tequila, and RTD; strength in Old Forester, Woodford Reserve, and Diplomático (order timing) helped partially offset declines; distributors continue to target low-end inventory levels amid high inflation/interest rates .
Near-term stock narrative catalysts: guidance reaffirmation amid margin compression; normalization of inventory trends and pricing discipline vs FX/macro headwinds; brand mix shifts (premium bourbon resilience vs tequila softness) .

What Went Well and What Went Wrong

What Went Well

Premium Bourbons resilience: Woodford Reserve and Old Forester grew net sales; Old Forester shipments +7% and net sales +16%; Woodford net sales +3% (organic) .
Diplomatico contribution: positive order timing; helped offset Rest of Portfolio declines due to Finlandia divestiture and FX .
CEO tone confident on FY25 trajectory: “we are pleased to reaffirm our full-year fiscal 2025 guidance… we believe we have the right strategy, brands, and geographic breadth… to effectively manage through the challenging consumer and cost environment” — Lawson Whiting (CEO) .

What Went Wrong

Gross margin down 330 bps to 59.4% on input cost timing and high inventories; operating margin down 200 bps to 29.6% with FX and TSAs drag; EPS -$0.07 y/y primarily from lower operating income .
Jack Daniel’s Tennessee Whiskey weakness across major markets; FX pressure vs Turkish lira; UK softness prominent .
Tequila portfolio materially softer: el Jimador net sales -26% (organic) on lower US/Colombia/Mexico volumes; Herradura net sales -15% reported (-14% organic) with Mexico weakness .

Financial Results

Quarterly Performance vs prior quarters

Metric	Q3 FY2024	Q4 FY2024	Q1 FY2025
Net sales ($USD Millions)	$1,069	$964	$951
Gross margin (%)	59.4%	59.0%	59.4%
Operating income ($USD Millions)	$373	$375	$281
Operating margin (%)	34.9%	38.9%	29.6%
Net income ($USD Millions)	$285	$266	$195
Diluted EPS ($USD)	$0.60	$0.56	$0.41

Notes: Gross margin -330 bps y/y to 59.4%; operating margin -200 bps y/y to 29.6% in Q1 FY2025 .

Segment/Category Net Sales Change (Q1 FY2025 vs prior-year)

Category	Reported % Change	Organic % Change	FX Contribution	Acq/Divestiture Contribution	JDCC Contribution
Whiskey	(5%)	(3%)	+2%	—	—
Jack Daniel’s Tennessee Whiskey (JDTW)	(8%)	(6%)	+2%	—	—
Woodford Reserve	+3%	+3%	—	—	—
Old Forester	+16%	+16%	—	—	—
Tequila (Portfolio)	(23%)	(23%)	—	—	—
Ready-to-Drink (RTD)	(12%)	(4%)	+2%	—	+7% JDCC reported
Rest of Portfolio	(18%)	+1%	Negative FX	Finlandia divestiture drag	—

KPIs (Q1 FY2025)

KPI	Value	YoY Change
Whiskey depletions (9L cases, millions)	5.0	(7%)
Whiskey shipments (9L cases, millions)	5.0	(6%)
JDTW depletions (millions)	3.4	(8%)
JDTW shipments (millions)	3.4	(8%)
Woodford shipments (millions)	0.4	+2%
Old Forester shipments (millions)	0.1	+7%
RTD shipments (millions)	4.9	(8%)
Tequila shipments (millions)	0.5	(27%)

Guidance Changes

Metric	Period	Previous Guidance (FY2025, as of Jun 5, 2024)	Current Guidance (Aug 29, 2024)	Change
Organic net sales growth	FY2025	2%–4%	2%–4%	Maintained
Organic operating income growth	FY2025	2%–4%	2%–4%	Maintained
Effective tax rate	FY2025	~21%–23%	~21%–23%	Maintained
Capital expenditures	FY2025	$195–$205M	$195–$205M	Maintained
Dividend	Q1 FY2025	$0.2178 declared Jan 23 for Apr 1 payment (context)	$0.2178 declared Jul 25 for Oct 1 payment	Maintained

Earnings Call Themes & Trends

Note: The Q1 FY2025 earnings call transcript was not found in source documents; themes are inferred from press releases for Q3 FY2024, Q4 FY2024, and Q1 FY2025 .

Topic	Previous Mentions (Q3 FY2024)	Previous Mentions (Q4 FY2024)	Current Period (Q1 FY2025)	Trend
Inventory normalization	Decreases across value chain; net decrease in distributor inventories; margin expanding YoY	US/developed inventory reductions; margin expansion YoY	Distributors targeting low-end inventory ranges; normalization expected to support growth	Improving over FY2025 timeline
Input costs / Gross margin	GM up 250 bps YTD; lower supply chain disruption costs	GM up 150 bps FY; lower supply chain disruption costs	GM down 330 bps on input cost timing and high inventories	Near-term pressure vs FY improvement
FX impact	Negative FX in YTD margin	Negative FX in FY margin	FX headwinds (e.g., Turkish lira) impacting JDTW	Ongoing headwind
Route-to-market changes	Japan inventory build/transition to owned distribution April 1, 2024	Japan normalization post transition	Japan boost from distributor ordering pattern changes	Transition benefits realized
Brand mix: Premium bourbon vs Tequila	Premium bourbons resilient; tequila mixed	Premium bourbons strong; tequila flat to down	Premium bourbons strong; tequila materially soft (US/Mexico)	Mix shift towards premium bourbon
Divestitures / TSAs	Finlandia sale; pending Sonoma-Cutrer; TSA effects noted	Gains from divestitures; TSAs affect P&L	TSAs pressure margins; Rest of Portfolio organic +1% despite divestiture	Transitional drag persists
RTD strategy	JD & Coca-Cola launch offsets JD & Cola declines	RTD growth modest; inventory decrease in US	RTD reported -12%; organic -4%; JDCC model change impacts	Mixed; model change normalization

Management Commentary

Lawson Whiting (CEO): “Our first quarter results were in line with our expectations and… we are pleased to reaffirm our full-year fiscal 2025 guidance, including organic top and bottom line growth and continued reported gross margin expansion. We believe we have the right strategy, brands, and geographic breadth… to effectively manage through the challenging consumer and cost environment” .
Strategy emphasis: price/mix discipline, premium portfolio resilience (Old Forester, Woodford Reserve), and managing distributor inventories amid macro uncertainty .

Q&A Highlights

The Q1 FY2025 earnings call transcript was not available in the document catalog, so specific Q&A themes, guidance clarifications, and tone shifts cannot be cited. Brown‑Forman hosted the call at 10:00am ET on Aug 29, with replay and slides available for 30 days, but the transcript is not present in the retrieved sources .

Estimates Context

S&P Global consensus estimates for Q1 FY2025 revenue and EPS were unavailable due to missing CIQ mapping for BF‑B; as a result, beats/misses vs consensus cannot be assessed and may require manual S&P data retrieval once mapping is resolved. Values in this recap rely on company filings and press releases [GetEstimates error].
Given the reaffirmed FY2025 guidance despite Q1 margin compression, sell‑side estimates may need to balance near‑term cost timing and FX headwinds with expected inventory normalization and international gains .

Key Takeaways for Investors

Q1 pressure but FY guidance intact: reported top/bottom-line declines and margin compression contrast with management’s reaffirmed FY2025 organic growth outlook — watch for inventory normalization and pricing/mix to rebuild margins through the year .
Brand mix pivot: premium bourbons (Old Forester, Woodford) continue to outperform versus tequila softness and RTD normalization, supporting margin quality and portfolio resilience .
FX and transitional factors matter: Turkish lira FX headwinds and TSAs tied to Finlandia/Sonoma-Cutrer are non-operational drags that should fade over time, improving comparability .
Distributor behavior: US distributors targeting low-end inventories amid macro pressures — shipment timing can obscure end demand; monitor depletions and takeaway indicators for true demand signal .
Non-GAAP items: JDCC and Franchise Tax Refund, plus gain on sale of Alabama cooperage, affect reported/organic reconciliations — focus on organic metrics for underlying trend .
International momentum: Japan/Developed International adjustments post route-to-market changes and Emerging market pricing (e.g., Türkiye) are potential supports; UK weakness remains a watch item .
Actionable: near-term volatility likely around margin cadence and channel inventories; medium-term thesis hinges on premium bourbon strength, inventory normalization, disciplined pricing, and easing FX/transition headwinds .

BROWN FORMAN CORP (BF-B)·Q1 2025 Earnings Summary