BROWN FORMAN CORP (BF-B)·Q4 2024 Earnings Summary

Executive Summary

• Q4 FY2024 net sales were $964M, down 8% year over year, while diluted EPS rose 31% to $0.56; operating income increased 26% to $375M, aided by divestiture gains, but organic operating income declined 16% .
• Gross margin in Q4 was 59.0% vs 60.8% in Q4 FY2023; operating margin rose to 38.9% on one-time items, masking softer organic trends tied to distributor inventory reductions across the value chain .
• FY2025 guidance calls for organic net sales growth of 2–4%, organic operating income growth of 2–4%, a 21–23% effective tax rate, and capex of $195–$205M, signaling expected normalization and margin expansion .
• Stock narrative catalyst: confirmation that inventory normalization is largely behind the industry, pricing discipline continues, and input cost pressures are moderating (agave, glass, transport), supporting medium-term margin expansion .

What Went Well and What Went Wrong

What Went Well

• EPS and operating income rose despite top-line pressure: diluted EPS increased to $0.56 (+31% YoY), and operating income to $375M (+26% YoY), supported by divestiture gains and prior-year impairment absent this quarter .
• Pricing/mix held firm and gross margin expansion for the year: FY gross margin expanded 150 bps to 60.5% on favorable price/mix and lower supply chain disruption costs, offsetting input cost inflation .
• Portfolio breadth and RTD momentum: Diplomático and Gin Mare drove Rest of Portfolio’s reported net sales +61% (+15% organic), while New Mix grew reported net sales +32% (+17% organic) .
• CEO quote underscored resilience and forward momentum: “We believe we can build on this foundation and deliver top and bottom line organic growth as well as continued gross margin expansion” .

What Went Wrong

• Core brand volume softness and distributor inventory reductions weighed on organic trends: Q4 organic net sales -5% and organic operating income -16% as lower shipments reflected inventory drawdowns .
• Jack Daniel’s Tennessee Whiskey and Tequila portfolios faced pressure: JDTW reported net sales -6% (-5% organic) and Tequila -4% (-7% organic) for FY2024 amid U.S. inventory reductions .
• Q4 gross margin backtracked vs prior year quarter (59.0% vs 60.8%), while SG&A rose 14% YoY in Q4, reflecting compensation/benefit increases and a $23M foundation commitment .

Financial Results

Quarterly Financials (Oldest → Newest)

Q4 Year-over-Year Comparison

Note: Organic performance in Q4 was -5% net sales and -16% operating income, reflecting distributor inventory normalization .

Segment and Portfolio Breakdown (Trend Context)

Nine months (ended Jan 31, 2024) vs Full-year (ended Apr 30, 2024) net sales %:

KPIs (Q4 FY2024)

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• CEO perspective: “In a challenging year within the spirits industry... when you adjust for the changes in distributor inventory, we feel good about the results... confident in the strength of our strategy, brands, and business... deliver top and bottom line organic growth as well as continued gross margin expansion” .
• FY2024 operational drivers: Gross margin expansion driven by favorable price/mix and lower supply chain disruption costs; offset by higher input costs and FX .
• Portfolio strategy: Strength in Diplomático and Gin Mare; continued investment in Jack Daniel’s & Coca-Cola RTD launch and super-premium American whiskey .

Q&A Highlights

• Cost inflation trajectory: Management noted agave prices have fallen to as low as MXN 9/kg; US glass expected +2–3%; transport costs low-single-digit increases—overall inflation moderating, but lower production volume adds cost headwinds .
• Inventory normalization: Emphasis that distributor inventory reductions impacted organic shipment trends but are expected to normalize, supporting 2–4% organic net sales growth in FY2025 .
• RTD execution: Ongoing transition from Jack & Cola to Jack & Coca-Cola RTD impacting mix short term; longer-term RTD growth intact .
• Route-to-consumer in Japan: Benefits from owned distribution include pricing clarity and improved execution referenced by management in broader commentary .

Estimates Context

• S&P Global Wall Street consensus estimates for Q4 FY2024 were unavailable due to a Capital IQ mapping issue for BF-B in our SPGI dataset. As a result, we cannot present a vs-consensus comparison for revenue or EPS at this time. We will update when mapping is available.

Key Takeaways for Investors

• Organic trends should improve as distributor inventories normalize; FY2025 guidance (2–4% organic net sales and operating income growth) sets a realistic base for recovery .
• Margin setup is constructive: annual gross margin expanded 150 bps; call commentary indicates moderating input costs (agave, glass, transport) aiding FY2025 margin trajectory .
• Portfolio diversification mitigates core headwinds: Rest of Portfolio growth (Diplomático, Gin Mare) and super-premium expressions provide resilience while core JDTW volumes adjust .
• One-time items inflated Q4 operating margin; investors should focus on organic metrics (-5% net sales, -16% OI) and normalized run-rate into FY2025 .
• RTD transition is a near-term headwind but strategic tailwind longer term; watch JD & Coca-Cola adoption and mix effects .
• Execution in Japan via owned distribution can unlock pricing and route-to-consumer benefits; monitor FY2025 progress .
• Trading lens: near-term results may be choppy given tough comps and inventory dynamics; medium-term setup favors margin expansion and steady low-single-digit organic growth as cost pressures abate .