Louisville, KY, Brown‑Forman Corporation (NYSE: BFA, BFB) reported financial results for its fourth quarter and fiscal year ended April 30, 2022. For the fourth quarter, the company’s reported net sales1 of $996 million increased 23% (+27% on an organic basis2). In the quarter, reported operating income increased 46% to $246 million (+62% on an organic basis) and diluted earnings per share increased 26% to $0.31.
For the full year, the company’s reported net sales increased 14% to $3,933 million (+17% on an organic basis). Reported operating income increased 3% to $1,204 million (+27% on an organic basis) in the fiscal year, while diluted earnings per share decreased 7% to $1.74 primarily due to higher income taxes partially offset by the increase in reported operating income. Earnings per share in fiscal 2021 included an estimated $0.20 per share benefit from the gain on the sale of the Early Times, Canadian Mist, and Collingwood brands and related assets.
Lawson Whiting, Brown‑Forman’s President and Chief Executive Officer stated, “I am proud of our exceptional results, our strategic progress, and yet another year of growth despite numerous headwinds. We achieved these results due in large part to the resurgence of Jack Daniel’s Tennessee Whiskey, which experienced strong consumer demand as the on-premise channel reopened around the world. Equally important, we believe we are well positioned for continued growth in the fiscal year ahead given our strategic initiatives and our talented teams.”
Fiscal 2022 Highlights
• Reported net sales grew 14% (+17% organic) building on our fiscal 2021 growth.
- All geographic clusters contributed meaningfully to strong reported net sales growth.
- Jack Daniel’s Tennessee Whiskey fueled overall company performance with 20% reported net sales growth (+23% organic).
- Premium bourbons, led by Woodford Reserve and Old Forester, grew reported net sales 17% (+17% organic).
- The tequila portfolio, driven by Herradura and el Jimador, grew reported net sales 22% (+20% organic).
- Gross margin expanded 30 basis points.
- Reported advertising expense increased 10% (+11% organic) as we continued to invest for growth across the brand portfolio.
- Returned $831 million to stockholders, which included a special cash dividend of $1 per share, or approximately $480 million, and $351 million in regular dividends.
Fiscal 2022 Brand Results
• The Jack Daniel’s family of brands delivered double-digit reported net sales growth of 15% (+17% organic) fueled by a strong, broad-based resurgence of Jack Daniel’s Tennessee Whiskey, reflecting higher volumes and a favorable channel mix shift to the on-premise channel. An estimated net increase in distributor inventories positively impacted reported net sales. Further gains for the Jack Daniel’s family of brands were delivered by the continued international launch of Jack Daniel’s Tennessee Apple and the international growth of Jack Daniel’s RTDs. Supply chain disruptions adversely impacted fiscal 2022 results for Jack Daniel’s Tennessee Whiskey, Jack Daniel’s Tennessee Honey, and Jack Daniel’s Tennessee Fire.
• Premium bourbons, propelled by Woodford Reserve and Old Forester, delivered 17% reported net sales growth (+17% organic). Gains for Woodford Reserve, the leader by volume and value in the super-premium American whiskey category, were driven by higher volumes and pricing in the United States and higher volumes in the Travel Retail channel. Woodford Reserve’s reported net sales were negatively impacted by supply chain disruptions. Old Forester sustained double-digit reported net sales growth and surpassed 400,000 nine-liter cases in fiscal 2022.
• Our tequilas delivered double-digit reported net sales growth of 22% (+21% organic) driven by the broad-based growth of Herradura and el Jimador, led by the United States.
Fiscal 2022 Market Results
• The company delivered strong, broad-based reported net sales growth across all geographic clusters and the Travel Retail channel. Supply chain disruptions had an adverse effect on results.
• Reported net sales in the United States3 grew 10% (+12% organic) led by Jack Daniel’s Tennessee Whiskey, higher volumes and price increases for our premium bourbons, Woodford Reserve, and Old Forester, and volumetric growth of Herradura and el Jimador. An estimated net increase in distributor inventories positively impacted reported net sales. Reported net sales growth was partially offset by the effect of acquisitions and divestitures in the prior year along with lower volumes for Jack Daniel’s Tennessee Honey, which was adversely impacted by supply chain disruptions.
• Developed international3 markets grew reported net sales 12% (+16% organic) with broad-based volumetric growth from Jack Daniel’s Tennessee Whiskey and higher volumes and prices of Jack Daniel’s RTDs. An estimated net increase in distributor inventories positively impacted reported net sales. Reported net sales growth was partially offset by the negative effect of foreign exchange.
• Emerging markets3 grew reported net sales 24% (+29% organic) reflecting the broad-based growth of Jack Daniel’s Tennessee Whiskey and the continued international launch of Jack Daniel’s Tennessee Apple, partially offset by the negative effect of foreign exchange. An estimated net increase in distributor inventories positively impacted reported net sales.
• The Travel Retail3 channel rebounded with reported net sales growth of 65% (+67% organic) as we cycled against significant declines during the same prior year period.
Fiscal 2022 Other P&L Items
• Reported gross profit increased 14% (+17% organic). Gross margin expanded 30 basis points to 60.8%, driven primarily by favorable price/mix and the effect of acquisitions and divestitures, largely offset by higher costs.
• Reported advertising expense increased 10% (+11% organic) as the company continued to fuel momentum and invest for future growth. Reported selling, general, and administrative expenses increased 3% (+7% organic) due to higher discretionary spend and one-time items including a special employee bonus and costs related to the impact of Russia’s invasion of Ukraine.
• During the fourth quarter, we recognized a $52 million non-cash impairment charge for our Finlandia brand name. The impairment reflects a decline in our long-term outlook for Finlandia due to our suspension of operations in Russia, a key market for the brand.
• The company’s reported operating income increased by 3% (+27% organic).
Fiscal 2022 Financial Stewardship
• During fiscal 2022, the company returned nearly $831 million to stockholders through its regular quarterly dividend as well as a $480 million special dividend paid during the third quarter of fiscal 2022. Brown‑Forman, a member of the prestigious S&P 500 Dividend Aristocrats index, has paid regular quarterly cash dividends for 78 consecutive years and has increased the regular dividend for 38 consecutive years.
Fiscal Year 2023 Outlook
The company anticipates continued growth in fiscal 2023 despite global macroeconomic and geopolitical uncertainties. Accordingly, we expect the following in fiscal 2023:
• With the strength of our portfolio of brands and strong consumer demand, we expect organic net sales growth in the mid-single digit range.
• Considering the net effect of inflation and the removal of the EU and UK tariffs on American whiskey, we project reported gross margin to expand slightly.
• Based on the above expectations, we anticipate mid-single digit organic operating income growth.
• We expect our fiscal 2023 effective tax rate to be in the range of approximately 22% to 23%.
• Capital expenditures are planned to be in the range of $190 to $210 million.
Click here for full financial results.
Conference Call Details
Brown‑Forman will host a conference call to discuss these results at 10:00 a.m. (ET) today. All interested parties in the United States are invited to join the conference call by dialing 833-962-1472 and asking for the Brown‑Forman call. International callers should dial +1-442-268-1255. The company suggests that participants dial in 10 minutes in advance of the 10:00 a.m. (ET) start of the conference call. A live audio broadcast of the conference call, and the accompanying presentation slides, will also be available via Brown‑Forman’s Internet website, http://www.brown-forman.com/, through a link to “Investors/Events & Presentations.” A digital audio recording of the conference call and the presentation slides will also be posted on the website and will be available for at least 30 days following the conference call.
For over 150 years, Brown‑Forman Corporation has enriched the experience of life by responsibly building fine quality beverage alcohol brands, including Jack Daniel’s Tennessee Whiskey, Jack Daniel’s Tennessee RTDs, Jack Daniel’s Tennessee Honey, Jack Daniel’s Tennessee Fire, Jack Daniel’s Tennessee Apple, Gentleman Jack, Jack Daniel’s Single Barrel, Woodford Reserve, Old Forester, Coopers’ Craft, GlenDronach, Benriach, Glenglassaugh, Slane, Herradura, el Jimador, New Mix, Korbel, Sonoma‑Cutrer, Finlandia, Chambord, and Fords Gin. Brown‑Forman’s brands are supported by approximately 4,700 employees and sold in more than 170 countries worldwide. For more information about the company, please visit http://www.brown-forman.com/.
Important Information on Forward-Looking Statements:
This press release contains statements, estimates, and projections that are “forward-looking statements” as defined under U.S. federal securities laws. Words such as “aim,” “anticipate,” “aspire,” “believe,” “can,” “continue,” “could,” “envision,” “estimate,” “expect,” “expectation,” “intend,” “may,” “might,” “plan,” “potential,” “project,” “pursue,” “see,” “seek,” “should,” “will,” “would,” and similar words indicate forward-looking statements, which speak only as of the date we make them. Except as required by law, we do not intend to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. By their nature, forward-looking statements involve risks, uncertainties, and other factors (many beyond our control) that could cause our actual results to differ materially from our historical experience or from our current expectations or projections. These risks and uncertainties include, but are not limited to:
- Our substantial dependence upon the continued growth of the Jack Daniel's family of brands
- Substantial competition from new entrants, consolidations by competitors and retailers, and other competitive activities, such as pricing actions (including price reductions, promotions, discounting, couponing, or free goods), marketing, category expansion, product introductions, or entry or expansion in our geographic markets or distribution networks
- Route-to-consumer changes that affect the timing of our sales, temporarily disrupt the marketing or sale of our products, or result in higher fixed costs
- Disruption of our distribution network or inventory fluctuations in our products by distributors, wholesalers, or retailers
- Changes in consumer preferences, consumption, or purchase patterns – particularly away from larger producers in favor of small distilleries or local producers, or away from brown spirits, our premium products, or spirits generally, and our ability to anticipate or react to them; further legalization of marijuana; shifts in consumer purchase practices; bar, restaurant, travel, or other on-premise declines; shifts in demographic or health and wellness trends; or unfavorable consumer reaction to new products, line extensions, package changes, product reformulations, or other product innovation
- Production facility, aging warehouse, or supply chain disruption
- Imprecision in supply/demand forecasting
- Higher costs, lower quality, or unavailability of energy, water, raw materials, product ingredients, or labor
- Impact of health epidemics and pandemics, including the COVID-19 pandemic, and the risk of the resulting negative economic impact and related governmental actions
- Unfavorable global or regional economic conditions, particularly related to the COVID-19 pandemic, and related economic slowdowns or recessions, low consumer confidence, high unemployment, weak credit or capital markets, budget deficits, burdensome government debt, austerity measures, higher interest rates, higher taxes, political instability, higher inflation, deflation, lower returns on pension assets, or lower discount rates for pension obligations
- Product recalls or other product liability claims, product tampering, contamination, or quality issues
- Negative publicity related to our company, products, brands, marketing, executive leadership, employees, board of directors, family stockholders, operations, business performance, or prospects
- Failure to attract or retain key executive or employee talent
- Risks associated with acquisitions, dispositions, business partnerships, or investments – such as acquisition integration, termination difficulties or costs, or impairment in recorded value
- Risks associated with being a U.S.-based company with a global business, including commercial, political, and financial risks; local labor policies and conditions; protectionist trade policies, or economic or trade sanctions, including additional retaliatory tariffs on American whiskeys and the effectiveness of our actions to mitigate the negative impact on our margins, sales, and distributors; compliance with local trade practices and other regulations; terrorism; and health pandemics
- Failure to comply with anti-corruption laws, trade sanctions and restrictions, or similar laws or regulations
- Fluctuations in foreign currency exchange rates, particularly a stronger U.S. dollar
- Changes in laws, regulatory measures, or governmental policies – especially those that affect the production, importation, marketing, labeling, pricing, distribution, sale, or consumption of our beverage alcohol products
- Tax rate changes (including excise, corporate, sales or value-added taxes, property taxes, payroll taxes, import and export duties, and tariffs) or changes in related reserves, changes in tax rules or accounting standards, and the unpredictability and suddenness with which they can occur
- Decline in the social acceptability of beverage alcohol in significant markets
- Significant additional labeling or warning requirements or limitations on availability of our beverage alcohol products
- Counterfeiting and inadequate protection of our intellectual property rights
- Significant legal disputes and proceedings, or government investigations
- Cyber breach or failure or corruption of our key information technology systems or those of our suppliers, customers, or direct and indirect business partners, or failure to comply with personal data protection laws
- Our status as a family “controlled company” under New York Stock Exchange rules, and our dual-class share structure
For further information on these and other risks, please refer to our public filings, including the “Risk Factors” section of our annual report on Form 10-K and quarterly reports on Form 10-Q filed with the Securities and Exchange Commission.