Executive Summary

Q2 FY2024 delivered modest top-line growth and strong margin execution: net sales $1.11B (+1% YoY), operating income $339M (+8% YoY), diluted EPS $0.50 (+6% YoY); gross margin expanded to 60.6% in the quarter and +280 bps to 61.6% for the first half on price/mix and lower supply chain/tariff costs, partially offset by input cost inflation .
Outlook reduced: FY2024 organic net sales now 3–5% (from 5–7%), organic operating income 4–6% (from 6–8%); tax rate (≈21–23%) and capex ($250–$270M) unchanged, reflecting macro headwinds and inventory normalization dynamics, particularly in the U.S. .
Mix was favorable: Emerging markets (+17% reported) and Developed International (+3% reported) and Travel Retail (+3% reported) offset U.S. net sales decline (-4% reported) driven by lapping last year’s inventory rebuild; brand highlights included New Mix RTD (+41% reported) and Jack Daniel’s Tennessee Apple (+51% reported) .
Capital returns/corporate actions: dividend raised 6% to $0.2178 per share and a $400M repurchase authorization with ~$181M remaining as of Nov. 30, 2023, supporting total shareholder return while investing behind brands .

What Went Well and What Went Wrong

What Went Well
- Gross margin expansion: +280 bps in 1H to 61.6% on favorable price/mix and lower supply chain/tariff costs, despite higher inputs and FX headwinds; operating income grew in Q2 to $339M (+8% YoY) .
- Portfolio breadth and premiumization: strong contributions from acquisitions (Gin Mare, Diplomático), New Mix RTD (+41% reported) and Jack Daniel’s Tennessee Apple (+51% reported) .
- CEO tone constructive on H2: “Our first half fiscal 2024 results illustrate Brown-Forman’s ability to deliver continued growth... We continue to believe our premium portfolio and broad geographic footprint will position us for accelerated growth in the second half of the fiscal year.” .
What Went Wrong
- U.S. softness: reported net sales -4% (-5% organic) on lower volumes due to lapping last year’s inventory rebuild; Jack Daniel’s Tennessee Whiskey reported net sales -4% (-2% organic) .
- Japan headwind in Developed International: reported net sales -79% (-84% organic) on significant prior-year inventory build timing effects .
- Guidance trimmed: FY2024 organic net sales to 3–5% and organic operating income to 4–6% as management acknowledged input cost pressures and macro dynamics tempering expectations .

Financial Results

Metric	Q4 FY2023	Q1 FY2024	Q2 FY2024
Net Sales ($USD Billions)	$1.046	$1.038	$1.107
YoY Change (Net Sales)	+5%	+3%	+1%
Gross Margin (%)	60.8%	62.7%	60.6%
Operating Income ($USD Millions)	$298	$327	$339
Operating Margin (%)	28.5%	31.5%	30.6%
Net Income ($USD Millions)	$207	$231	$242
Diluted EPS ($)	$0.43	$0.48	$0.50
YoY Change (EPS)	+36%	-7%	+6%
Versus S&P Global Consensus	N/A – S&P Global consensus estimates unavailable in this environment (see Estimates Context)	N/A – S&P Global consensus estimates unavailable in this environment (see Estimates Context)	N/A – S&P Global consensus estimates unavailable in this environment (see Estimates Context)

Segment/Brand Aggregation (First Half FY2024)

Brand/Category	Reported Net Sales %	Organic Net Sales %
Whiskey (total)	-2%	-1%
Jack Daniel’s Tennessee Whiskey	-4%	-2%
Jack Daniel’s Tennessee Apple	+51%	+52%
Jack Daniel’s RTD/RTP	+2%	+1%
New Mix RTD	+41%	+22%
Tequila (portfolio)	+2%	-1%
Herradura	-5%	-9%
el Jimador	+8%	+7%
Rest of Portfolio (incl. Gin Mare, Diplomático)	+104%	+17%

Geography (First Half FY2024)

Geography	Reported Net Sales %	Organic Net Sales %
United States	-4%	-5%
Developed International	+3%	-2%
Emerging Markets	+17%	+19%
Travel Retail	+3%	0%
Japan (within Developed Intl)	-79%	-84%

KPIs and Expense Mix

KPI	Q2 FY2024 / 1H FY2024 Result
Gross Margin (Q2)	60.6%
Gross Margin (1H)	61.6% (+280 bps YoY)
Advertising Expense Growth (1H)	+17% reported (+12% organic)
SG&A Growth (1H)	+10% reported (+9% organic)
Estimated Net Change in Distributor Inventories (1H) – U.S.	-6% (implies de-stocking)
Estimated Net Change – Developed International	-4%
Estimated Net Change – Emerging	-5%
Estimated Net Change – Travel Retail	+1%
Q2 Cash Dividend per Share (paid in quarter)	$0.2055
Dividend increase announced Nov. 16, 2023	+6% to $0.2178/share

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Organic Net Sales Growth	FY2024	5–7%	3–5%	Lowered
Organic Operating Income Growth	FY2024	6–8%	4–6%	Lowered
Effective Tax Rate	FY2024	≈21–23%	≈21–23%	Maintained
Capital Expenditures	FY2024	$250–$270M	$250–$270M	Maintained
Dividend	Ongoing	$0.2055 prior quarterly run-rate	$0.2178 per share quarterly (effective Nov. 16, 2023)	Raised

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4 FY2023, Q1 FY2024)	Current Period (Q2 FY2024)	Trend
Supply chain and distributor inventories	Q4 FY2023: net increases in some markets supported results; U.S. had est. net decrease in inventories; supply chain costs pressured margin . Q1 FY2024: U.S. decline driven by est. net decrease in distributor inventories; lapping FY2023 rebuild .	U.S. reported net sales -4% on lower volumes due to lapping prior-year inventory rebuild; estimated net change negative across clusters (U.S. -6%) .	Normalization continuing; inventory a headwind in U.S. .
Input costs and margins	Q4 FY2023: gross margin contracted on inflation/supply chain/tariffs; still favorable price/mix . Q1 FY2024: gross margin +90 bps on price/mix and lower supply chain/tariff costs .	Gross margin +280 bps in 1H; continued input cost pressures partly offset by lower supply chain disruption costs .	Improving margin backdrop despite input cost pressure .
Pricing/mix	Q4 FY2023: favorable price/mix across portfolio . Q1 FY2024: higher prices led by Jack Daniel’s Tennessee Whiskey .	Continued favorable price/mix underpinning margins .	Supportive .
RTD launch and transitions	Q4 FY2023: introduction of Jack Daniel’s & Coca-Cola RTD in U.S. . Q1 FY2024: launch continues; JD RTD contributions; JD & Cola lower as transition occurs .	JD RTD/RTP +2% reported; JD & Cola seeing lower volumes due to transition to Jack Daniel’s & Coca-Cola RTD .	Scaling, with transitional mix effects .
Regional trends	Q4 FY2023: broad-based growth; Emerging +18%; U.S. +3% . Q1 FY2024: U.S. -8%; Developed Intl +5%; Travel Retail +13% .	Emerging +17% reported; Developed Intl +3%; Travel Retail +3%; U.S. -4% reported; Japan specifically weak (-79%) .	Mixed: Emerging strong; U.S./Japan weaker .
M&A/brand integration	Q4 FY2023: Gin Mare and Diplomático acquired; contributed to FY2023 growth . Q1 FY2024: acquisitions added ~2 pts to reported growth .	Acquisitions continued to support growth (Rest of Portfolio +104% reported; +17% organic) .	Positive contribution sustained .

Management Commentary

Strategy and outlook: “While we grew at a slower pace than anticipated, we delivered strong gross margin expansion and continued to invest strongly behind our brands. We continue to believe our premium portfolio and broad geographic footprint will position us for accelerated growth in the second half of the fiscal year.” — Lawson Whiting, CEO .
Macro and guidance: “Evolving global macroeconomic conditions continue to create a challenging operating environment tempering our expectations.” Management now expects FY2024 organic net sales +3–5% and organic operating income +4–6% .
Capital allocation: Board authorized up to $400M repurchase (approx. $181M remaining as of Nov. 30, 2023) and approved a 6% dividend increase to $0.2178 per share, underscoring long dividend track record .

Q&A Highlights

Inventory normalization and U.S. trends: Management highlighted lower U.S. volumes due to lapping last year’s inventory rebuild and estimated net decreases in distributor inventories in 1H, framing near-term headwinds and expected H2 acceleration .
Mix and margin: Reinforced margin expansion drivers (price/mix, lower supply chain/tariff costs) while acknowledging continued input cost pressure embedded in the revised guidance .
Jack Daniel’s RTD transition: Continued rollout of Jack Daniel’s & Coca‑Cola RTD while JD & Cola volumes decline amid transition effects .
Shareholder returns: Update on $400M buyback authorization and dividend increase was reiterated alongside brand investment priorities .

Estimates Context

S&P Global (Capital IQ) Wall Street consensus estimates for Q2 FY2024 could not be retrieved in this environment due to a mapping limitation; therefore, we are unable to present revenue/EPS beats or misses versus S&P Global consensus for this quarter. Values would normally be sourced from S&P Global; consensus unavailable here [SpgiEstimatesError returned by tool].

Key Takeaways for Investors

Mix-led margin expansion is intact: Q2 gross margin 60.6% and 1H margin +280 bps YoY on price/mix and lower supply chain/tariff costs despite input inflation .
U.S. de-stocking and prior-year timing remain the key near-term headwind; watch for H2 normalization and shipment-to-depletion convergence as a potential catalyst .
Growth leadership from Emerging markets and RTDs continues (New Mix +41% reported; JD Apple +51% reported), supporting top-line resilience amid category/market volatility .
Guidance reset lowers the bar to achievable 3–5% organic net sales and 4–6% organic operating income for FY2024; tax rate and capex unchanged, implying controlled expense posture with continued brand investment .
Capital returns underscore discipline (dividend +6% to $0.2178; active repurchase authorization), providing a supportive TSR backdrop .
Monitor Developed International, especially Japan, where prior-year inventory dynamics created a steep near-term headwind (-79% reported in 1H) that could ease on normalization .
Brand innovation/RTD transition (Jack Daniel’s & Coca‑Cola) is strategically important; near-term transition pressures (JD & Cola) should abate as the new platform scales .

Other Relevant Q2 FY2024-period Press Releases

Second quarter and first half FY2024 results press release (Dec. 6, 2023) .
Dividend increase announcement (Nov. 16, 2023): quarterly dividend raised 6% to $0.2178 per share .
Earnings release scheduling notice (Nov. 6, 2023) .

Prior Two Quarters (for Trend Analysis)

Q1 FY2024: Net sales $1.038B (+3% YoY), operating income $327M (-4% YoY), diluted EPS $0.48 (-7% YoY); gross margin 62.7% (+90 bps YoY). U.S. decline driven by estimated net decrease in distributor inventories; guidance at the time reaffirmed (5–7% organic net sales; 6–8% organic OI) .
Q4 FY2023: Net sales $1.046B (+5% YoY), operating income $298M (+21% YoY), diluted EPS $0.43 (+36% YoY); gross margin 60.8% (down YoY for FY2023 on inflation/supply chain/FX). FY2024 outlook initially 5–7% organic net sales and 6–8% organic OI .

Notes: All period references are fiscal. Where explicit S&P Global consensus figures would typically be shown (beats/misses), consensus was unavailable in this environment.

BROWN FORMAN CORP (BF-B)·Q2 2024 Earnings Summary