Brown-Forman Reports Decline in Net Sales and Operating Income for Nine Months Ending January 31, 2025

Brown-Forman Corporation reported its financial results for the nine months ending January 31, 2025, revealing a decline in net sales and operating income compared to the previous fiscal year. The company generated net sales of $3.1 billion, a decrease of 4% from $3.2 billion in the same period last year. This decline was attributed to the negative impacts of divestitures, particularly the sale of the Finlandia vodka and Sonoma-Cutrer wine businesses, as well as unfavorable foreign exchange rates. Gross profit also fell by 6% to $1.8 billion, with gross margin decreasing from 60.9% to 59.4%.

Operating income for the nine-month period was reported at $902 million, down 13% from $1.04 billion in the prior year. The decrease was primarily driven by higher costs, the absence of gains from the sale of the Finlandia vodka business, and restructuring charges associated with a plan to reduce the workforce by approximately 12%. The company incurred $33 million in restructuring and other charges during this period. Diluted earnings per share decreased by 4% to $1.53, compared to $1.58 in the previous year.

In terms of strategic developments, Brown-Forman completed the sale of its Finlandia vodka business for $194 million in cash in November 2023, which resulted in a pre-tax gain of $90 million. Additionally, the company sold its Sonoma-Cutrer wine business, receiving a 21.4% stake in The Duckhorn Portfolio, which was later sold for $350 million, resulting in a $78 million gain. These divestitures have significantly impacted the company's sales and operating income figures.

Geographically, net sales declined across all major markets, with the United States experiencing a 5% drop, primarily due to the divestiture of Sonoma-Cutrer and lower volumes of key brands. Developed international markets, including Germany and the United Kingdom, also saw declines, while emerging markets like Brazil reported a 6% increase in net sales, driven by higher volumes of Jack Daniel's products. The company noted a significant increase in non-branded and bulk sales, which rose by 38% due to higher prices for used barrels.

Looking ahead, Brown-Forman anticipates a return to organic net sales and operating income growth for fiscal 2025, projecting organic net sales growth in the range of 2% to 4%. The company plans to invest between $180 million and $190 million in capital expenditures and has updated its effective tax rate forecast to approximately 20% to 22%. The outlook reflects the company's confidence in its ability to navigate current market challenges and capitalize on growth opportunities in the beverage alcohol sector.