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BF

BROWN FORMAN CORP (BF-B)·Q3 2024 Earnings Summary

Executive Summary

  • Q3 FY2024: Net sales decreased 1% to $1.07B; reported operating income rose 116% to $373M; diluted EPS increased 189% to $0.60. Gross margin expanded 170 bps YoY to 59.4%, and operating margin reached 34.9% .
  • Guidance cut: FY2024 organic net sales outlook reduced from 3–5% (Dec) to flat (Mar); organic operating income lowered from 4–6% to 0–2%; tax-rate outlook trimmed to ~20–22% (from 21–23%); capex reduced to $230–$240M (from $250–$270M). This shift is the primary catalyst for the quarter .
  • Mix highlights: Strength in Gin Mare/Diplomático (+79% reported YTD), New Mix (+34% reported YTD), and Jack Daniel’s Tennessee Apple (+44% reported YTD), offset by declines in Jack Daniel’s Tennessee Whiskey (-6% reported YTD) and Developed International markets (Japan RTM transition) .
  • Estimate comparison: S&P Global consensus data was unavailable due to a missing CIQ mapping for BF-B; beats/misses vs Street cannot be determined at this time (we attempted retrieval via S&P Global) [SpgiEstimatesError].

What Went Well and What Went Wrong

What Went Well

  • Margin expansion and profitability: Reported operating income +116% YoY to $373M; diluted EPS +189% to $0.60; gross margin up to 59.4% (+170 bps YoY for the quarter; +250 bps YTD), driven by favorable price/mix and lower supply chain disruption costs .
  • Portfolio breadth offsetting headwinds: Rest of Portfolio (Gin Mare, Diplomático) +79% reported YTD (+11% organic); New Mix +34% reported (+17% organic); Jack Daniel’s Tennessee Apple +44% reported (+45% organic) .
  • CEO tone of resilience: “We have expanded our gross margin, executed our strategic priorities, and invested behind the business… we remain confident in the strength of our portfolio and our ability to deliver long-term growth.” — Lawson Whiting, CEO .

What Went Wrong

  • Topline softness: Q3 reported net sales -1% (-2% organic), reflecting slower-than-anticipated growth; FY2024 organic net sales guidance cut to flat .
  • Flagship pressure: Jack Daniel’s Tennessee Whiskey reported net sales declined 6% YTD (-5% organic), with Japan experiencing lower volumes following prior-year inventory build ahead of route-to-consumer transition .
  • U.S. and Developed International weakness: U.S. YTD net sales -1% reported (-2% organic) amid distributor inventory reductions; Developed International -2% reported (-6% organic) with transition impacts in Japan .

Financial Results

MetricQ3 FY2023Q2 FY2024Q3 FY2024
Net Sales ($USD Billions)$1.081 $1.107 $1.069
Gross Margin (%)57.7% 60.6% 59.4%
Operating Income ($USD Millions)$173 $339 $373
Operating Margin (%)15.9% 30.6% 34.9%
Diluted EPS ($USD)$0.21 $0.50 $0.60
Effective Tax Rate (%)19.5% 22.0% 16.5%
Year-to-Date (9 months)FY2023FY2024
Net Sales ($USD Billions)$3.182 $3.214
Gross Margin (%)58.4% 60.9%
Operating Income ($USD Billions)$0.829 $1.039
Diluted EPS ($USD)$1.20 $1.58

Segment/Brand (YTD FY2024; Net Sales % change vs prior-year)

Category/BrandReported NS % ChangeOrganic NS % Change
Jack Daniel’s Tennessee Whiskey (JDTW)-6% -5%
Jack Daniel’s Tennessee Apple (JDTA)+44% +45%
Jack Daniel’s Tennessee Honey (JDTH)-6% -6%
Gentleman Jack-10% -9%
Woodford Reserve+2% +2%
Old Forester+5% +5%
Jack Daniel’s RTD/RTP+1% +1%
New Mix RTD+34% +17%
Herradura-7% -10%
el Jimador+5% +4%
Rest of Portfolio (Gin Mare, Diplomático, etc.)+79% +11%

Volume KPIs (YTD FY2024; 9-Liter cases)

KPIValueYoY Change
Total Portfolio Depletions (Millions)37.6 -3%
Total Portfolio Shipments (Millions)38.2 -7%

Guidance Changes

MetricPeriodPrevious Guidance (Dec 6, 2023)Current Guidance (Mar 6, 2024)Change
Organic Net Sales GrowthFY2024+3% to +5% ~Flat Lowered
Organic Operating Income GrowthFY2024+4% to +6% 0% to +2% Lowered
Effective Tax RateFY2024~21% to 23% ~20% to 22% Lowered
Capital ExpendituresFY2024$250–$270M $230–$240M Lowered
DividendFY2024$0.2178 per share (approved Nov 16; payable Jan 2, 2024) $0.2178 per share (declared Jan 23; payable Apr 1, 2024) Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q3 FY2024)Trend
Supply chain & gross marginQ2: Gross margin expanded 280 bps; tailwind from lapping supply chain disruption costs and lower tariff-related costs . Q1: Not available in our document set.Gross margin expansion of 250 bps YTD driven by favorable price/mix and lower disruption costs .Continued improvement; normalization supportive.
Distributor inventory adjustmentsQ2: U.S. decline driven by lapping inventory rebuild; estimated net decreases across regions/categories .U.S. YTD -1% reported (-2% organic) with net inventory decreases; Developed International weakness includes Japan transition .Destocking persists; normalization expected to aid FY2025.
Japan route-to-consumer transitionQ2: Lower volumes in Japan after prior-year inventory build .Prepared for transition to owned distribution (Apr 1, 2024); lower volumes persisted .Transitional headwind near-term; strategic alignment long-term.
Product performance (RTD, super-premium)Q2: New Mix +41% reported; JD RTD/RTP +2%; super-premium expressions contributed .New Mix +34% reported; JD RTD/RTP +1%; super-premium support in Travel Retail .RTD momentum steady; mix benefits continue.
M&A/portfolio actionsQ2: Business gains from Gin Mare/Diplomático; $7M fixed asset sale gain .Finlandia sale completed ($90M pre-tax gain); pending Sonoma-Cutrer sale noted; share repurchases completed .Portfolio reshaping accretive to margins/cash.
Tariffs/macroQ2: Lower tariff-related costs contributed to margins .Macro uncertainty cited; outlook tempered; FX a headwind .Macro/tariff effects mixed; watch FX sensitivity.

Note: Q1 FY2024 references were not available in our document set.

Management Commentary

  • Lawson Whiting, CEO (Q3): “As industry trends have normalized, we have expanded our gross margin, executed our strategic priorities, and invested behind the business… we remain confident in the strength of our portfolio and our ability to deliver long-term growth.”
  • Lawson Whiting, CEO (Q2): “While we grew at a slower pace than anticipated, we delivered strong gross margin expansion and continued to invest strongly behind our brands… positioned for accelerated growth in the second half.”

Q&A Highlights

  • Full transcript link (external): Brown‑Forman Q3 FY2024 Earnings Call Transcript (Mar 6, 2024) and .
  • The company also posted call access details and replay availability on its investor site .
  • Note: Our internal document set did not include the transcript; please refer to the above links for full Q&A content.

Estimates Context

  • S&P Global (Capital IQ) consensus estimates for Q3 FY2024 were unavailable due to a missing CIQ mapping for BF-B in our SPGI integration; therefore, we cannot assess beats/misses vs Street at this time. We attempted retrieval via S&P Global, but the mapping error prevented access and will require database remediation to provide estimate comparisons [SpgiEstimatesError].

Key Takeaways for Investors

  • Guidance reset is the quarter’s key narrative: FY2024 organic net sales and operating income guidance were both lowered, signaling near-term growth normalization and inventory headwinds; this is likely the primary stock catalyst near-term .
  • Margin quality improved: Price/mix and reduced disruption costs expanded gross margin; continuing mix benefits from super-premium and RTD portfolios should support FY2025 margin trajectory .
  • Portfolio reshaping: Divestiture of Finlandia (gain ~$90M) and pending Sonoma-Cutrer sale streamline focus on premium brown spirits and RTD growth vectors; capital returns (completed $400M buyback) underscore balance sheet flexibility .
  • Watch Japan transition and U.S. depletion dynamics: Route-to-consumer changes and distributor destocking will influence near-term volumes; normalization should aid FY2025 top-line recovery .
  • Brand-level momentum diverges: JD Tennessee Apple, New Mix, and Rest of Portfolio are offsetting JD Tennessee Whiskey softness; monitor consumer takeaway and RTD rollout pacing (Jack Daniel’s & Coca‑Cola) .
  • FX and macro remain risk factors: Management flagged evolving macro conditions and FX as ongoing headwinds; keep an eye on geographic mix and pricing power .
  • Dividend durability: Continued quarterly dividends ($0.2178/share) reflect stability and long-term shareholder return focus .