Brown-Forman Reports Continued Momentum With Strong First Quarter Fiscal 2023 Results

LOUISVILLE, Ky.–(BUSINESS WIRE)–Brown-Forman Corporation (NYSE: BFA, BFB) reported financial results for its first quarter of fiscal 2023 with reported net sales¹ increasing 11% to $1.0 billion (+17% on an organic basis²) compared to the same prior-year period. In the quarter, reported operating income increased 19% to $343 million (+32% on an organic basis) and diluted earnings per share increased 30% to $0.52.

Lawson Whiting, Brown-Forman’s President and Chief Executive Officer stated, “Building on our exceptional fiscal 2022 results, Brown-Forman is off to a great start in fiscal 2023. Our strong strategic position, premium portfolio, continued innovation, and investment behind our brands have once again delivered double-digit revenue growth. While there is continued uncertainty in the market, I remain optimistic we can continue this momentum and deliver on both short- and long-term growth ambitions.”

First Quarter of Fiscal 2023 Highlights

Reported net sales grew 11% (+17% organic) and were positively impacted by an estimated net increase in distributor inventories.
- The Jack Daniel’s family of brands³ delivered 11% reported net sales growth (+19% organic), driven by 10% reported net sales growth (+21% organic) from Jack Daniel’s Tennessee Whiskey.
- Woodford Reserve grew reported net sales 38% (+39% organic).
- Ready-to-Drink³ (RTD) was fueled by Jack Daniel’s RTDs and New Mix with reported net sales growth of 17% (+21% organic).
- All geographic clusters and the Travel Retail³ channel benefited from strong growth.
Reported gross margin expanded 80 basis points.
Marketing investment increased 23% (+28% organic).

First Quarter of Fiscal 2023 Brand Results

The Jack Daniel’s family of brands delivered double-digit reported net sales growth of 11% (+19% organic) led by Jack Daniel’s Tennessee Whiskey, reflecting strong demand and higher prices in emerging markets, developed international markets, and the Travel Retail channel. An estimated net increase in distributor inventories positively impacted reported net sales. This growth was partially offset by the negative effect of foreign exchange. Continued consumer desire for flavor drove gains in Jack Daniel’s Tennessee Honey, Jack Daniel’s RTDs, and Jack Daniel’s Tennessee Fire. Innovation also contributed to net sales growth with the introduction of the Jack Daniel’s Bonded series.
Premium bourbons³, propelled by Woodford Reserve and Old Forester, delivered 35% reported net sales growth (+36% organic) driven by higher volumes in the United States. An estimated increase in distributor inventories positively impacted Woodford Reserve’s and Old Forester’s reported net sales.
Ready-to-Drink beverages delivered double-digit reported net sales growth. Consumer preference for convenience spurred Jack Daniel’s RTDs/Ready-to-Pours (RTPs) as reported net sales grew 12% (+17% organic) driven by Australia and Germany. New Mix grew reported net sales 44% (+41% organic) fueled by growth in Mexico as we gained market share in the RTD category.
Herradura’s reported net sales declined 4% (-5% organic) due to cycling significant growth during the same prior-year period in the United States and the current year impact of supply chain challenges.

First Quarter of Fiscal 2023 Market Results

All geographic clusters and the Travel Retail channel benefited from strong reported net sales growth driven by higher volumes. This growth was partially offset by foreign exchange headwinds. An estimated net increase in distributor inventories positively impacted reported net sales.
Reported net sales in the United States grew 7% (+7% organic) with volumetric gains of Woodford Reserve, Jack Daniel’s Tennessee Honey, and Jack Daniel’s Tennessee Fire. These gains were partially offset by lower volumes for Jack Daniel’s Tennessee Whiskey and Korbel California Champagne due to strong comparisons in the same period last year.
Developed International³markets experienced recovery of the on-trade channel and the return of travel and tourism as reported net sales increased 9% (+19% organic) due to volumetric growth from Jack Daniel’s Tennessee Whiskey and Jack Daniel’s RTDs. Reported net sales growth in developed international markets was led by Australia, Germany, and Spain.
Emerging³ marketsreported net sales increased 17% (+34% organic) reflecting the growth of Jack Daniel’s Tennessee Whiskey in Sub-Saharan Africa, Brazil, and Chile, as well as New Mix in Mexico.
The Travel Retail channel surged with reported net sales growth of 77% (+85% organic) driven primarily by higher volumes across much of the portfolio as travel continued to rebound.

First Quarter of Fiscal 2023 Other P&L Items

Reported gross profit increased 13% (+21% organic). Gross margin expanded 80 basis points to 61.8%, driven primarily by favorable price/mix and the removal of the EU and U.K. tariffs on American whiskey, partially offset by the negative effect of foreign exchange, higher costs related to supply chain disruptions, and input cost inflation.
Reported advertising expense grew 23% (+28% organic) driven by increased marketing investment in the United States to support Jack Daniel’s Tennessee Whiskey, Herradura, the launch of the Jack Daniel’s Bonded series, and Woodford Reserve. Reported selling, general, and administrative expenses increased 4% (+7% organic), largely driven by higher compensation-related expenses.
The company’s reported operating income increased by 19% (+32% organic).
Earnings per share increased 30.0% to $0.52 driven by the increase in reported operating income and the benefit of a lower effective tax rate.

First Quarter of Fiscal 2023 Financial Stewardship

On July 28, 2022, the Brown-Forman Board of Directors declared a regular quarterly cash dividend of $0.1885 cents per share on its Class A and Class B common stock. The dividend is payable on October 3, 2022, to stockholders of record on September 6, 2022. Brown-Forman has paid regular quarterly cash dividends for 78 consecutive years and has increased the regular cash 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 reiterate our guidance and continue to 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 U.K. tariffs on American whiskey, we project reported gross margin to increase 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.

Conference Call Details

Brown-Forman will host a conference call to discuss these results at 10:00 a.m. (ET) today. A live audio broadcast of the conference call, and the accompanying presentation slides, will be available via Brown-Forman’s website, 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, The 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 5,200 employees globally and sold in more than 170 countries worldwide. For more information about the company, please visit 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 impacts 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.

Brown-Forman Corporation Unaudited Consolidated Statements of Operations For the Three Months Ended July 31, 2021 and 2022 (Dollars in millions, except per share amounts)

	2021			2022			Change

Net sales	$	906		$	1,007		11%
Cost of sales		353			385		9%
Gross profit		553			622		13%
Advertising expenses		90			110		23%
Selling, general, and administrative expenses		168			175		4%
Other expense (income), net		6			(6	)
Operating income		289			343		19%
Interest expense, net		20			17
Income before income taxes		269			326		22%
Income taxes		77			77
Net income	$	192		$	249		30%

Earnings per share:
Basic	$	0.40		$	0.52		30%
Diluted	$	0.40		$	0.52		30%

Gross margin		61.0	%		61.8	%
Operating margin		31.9	%		34.0	%

Effective tax rate		28.5	%		23.6	%

Cash dividends paid per common share	$	0.1795		$	0.1885

Shares (in thousands) used in the
calculation of earnings per share
Basic		478,793			479,079
Diluted		480,718			480,444

Brown-Forman Corporation Unaudited Condensed Consolidated Balance Sheets (Dollars in millions)

	April 30, 2022		July 31, 2022
Assets:
Cash and cash equivalents	$	868	$	899
Accounts receivable, net		813		841
Inventories		1,818		1,912
Other current assets		277		271
Total current assets		3,776		3,923

Property, plant, and equipment, net		875		880
Goodwill		761		756
Other intangible assets		586		578
Other assets		375		384
Total assets	$	6,373	$	6,521

Liabilities:
Accounts payable and accrued expenses	$	703	$	644
Dividends payable		—		90
Accrued income taxes		81		126
Current portion of long-term debt		250		250
Total current liabilities		1,034		1,110

Long-term debt		2,019		1,998
Deferred income taxes		219		236
Accrued postretirement benefits		183		183
Other liabilities		181		187
Total liabilities		3,636		3,714

Stockholders’ equity		2,737		2,807

Total liabilities and stockholders’ equity	$	6,373	$	6,521

Brown-Forman Corporation Unaudited Condensed Consolidated Statements of Cash Flows For the Three Months Ended July 31, 2021 and 2022 (Dollars in millions)

	2021			2022

Cash provided by operating activities	$	185		$	173

Cash flows from investing activities:
Additions to property, plant, and equipment		(14	)		(33	)
Other		(1	)		(1	)
Cash provided by (used for) investing activities		(15	)		(34	)

Cash flows from financing activities:
Net change in short-term borrowings		(50	)		—
Dividends paid		(86	)		(90	)
Other		(5	)		(4	)
Cash used for financing activities		(141	)		(94	)

Effect of exchange rate changes		(7	)		(14	)

Net increase (decrease) in cash, cash equivalents, and restricted cash		22			31

Cash, cash equivalents, and restricted cash at beginning of period		1,150			874

Cash, cash equivalents, and restricted cash at end of period		1,172			905
Less: Restricted cash at end of period		—			(6	)
Cash and cash equivalents at end of period	$	1,172		$	899

Schedule A
Brown-Forman Corporation
Supplemental Statement of Operations Information (Unaudited)


	Three Months Ended	Fiscal Year Ended
	July 31, 2022	April 30, 2022

Reported change in net sales	*11%*	14%
Acquisitions and divestitures	—%	2%
Foreign exchange	6%	2%
Organic change in net sales²	*17%*	*17%*

Reported change in gross profit	*13%*	*14%*
Acquisitions and divestitures	—%	1%
Foreign exchange	8%	3%
Organic change in gross profit²	*21%*	*17%*

Reported change in advertising expenses	*23%*	*10%*
Foreign exchange	6%	2%
Organic change in advertising expenses²	*28%*	*11%*

Reported change in SG&A	4%	3%
Foundation	—%	3%
Foreign exchange	3%	1%
Organic change in SG&A²	7%	7%

Reported change in operating income	*19%*	3%
Acquisitions and divestitures	—%	14%
Foundation	—%	(2)%
Impairment Charges	(2)%	6%
Foreign exchange	16%	6%
Organic change in operating income²	*32%*	*27%*

Note: Totals may differ due to rounding to match the format of other schedules

See “Note 2 – Non-GAAP Financial Measures” for details on our use of Non-GAAP financial measures, how these measures are calculated and the reasons why we believe this information is useful to readers.

Schedule B
Brown-Forman Corporation Supplemental Brand Information (Unaudited) Three Months Ended July 31, 2022

Brand³	Supplemental Information -Depletions³		Shipments		Net Sales % Change vs. Prior Year Period
Brand³	9-Liter (Millions)	% Change vs. Prior Year Period	9-Liter (Millions)	% Change vs. Prior Year Period	Reported	Acquisitions and Divestitures	Foreign Exchange	Organic²
Whiskey	5.2	8%	5.5	16%	15%	—%	7%	22%
JDTW	3.6	11%	3.8	16%	10%	—%	11%	21%
JDTH	0.5	(9)%	0.5	10%	26%	—%	(9)%	16%
Gentleman Jack	0.2	(1)%	0.2	12%	8%	—%	9%	17%
JDTF	0.2	15%	0.2	33%	35%	—%	5%	41%
JDTA	0.2	(11)%	0.2	(24)%	(29)%	—%	6%	(22)%
Woodford Reserve	0.4	12%	0.4	30%	38%	—%	1%	39%
Old Forester	0.1	1%	0.1	18%	22%	—%	—%	22%
Rest of Whiskey	0.2	40%	0.1	40%	19%	1%	8%	28%
Ready-to-drink	5.4	23%	6.4	16%	17%	—%	4%	21%
JD RTD/RTP	3.0	17%	4.1	9%	12%	—%	5%	17%
New Mix	2.3	32%	2.3	32%	44%	—%	(3)%	41%
Tequila	0.6	(1)%	0.6	(8)%	(4)%	—%	—%	(3)%
Herradura	0.1	(20)%	0.2	(16)%	(4)%	—%	—%	(5)%
el Jimador	0.4	8%	0.4	2%	3%	—%	1%	4%
Wine	0.4	(10)%	0.4	(22)%	(13)%	—%	—%	(12)%
Vodka (Finlandia)	0.6	19%	0.6	10%	(10)%	—%	13%	3%
Rest of Portfolio	0.1	3%	0.2	20%	21%	—%	8%	29%
Non-branded and bulk	NM	NM	NM	NM	7%	23%	1%	32%
Total Portfolio	12.4	13%	13.7	13%	11%	—%	6%	17%
Other Brand Aggregations
Jack Daniel’s Family of Brands	7.8	11%	9.0	12%	11%	—%	8%	19%
American Whiskey	5.2	8%	5.5	16%	15%	—%	7%	22%
Premium Bourbons	0.5	9%	0.6	27%	35%	—%	1%	36%

Note: Totals may differ due to rounding

Schedule C
Brown-Forman Corporation Supplemental Geographic Information (Unaudited) Three Months Ended July 31, 2022

	% Change vs. Prior-Year Period
Geographic Area³	Net Sales
Geographic Area³	Reported	Acquisitions and Divestitures	Foreign Exchange	Organic²
United States	7%	—%	—%	7%
Developed International	9%	—%	10%	19%
Germany	13%	—%	14%	26%
Australia	15%	—%	1%	16%
United Kingdom	(8)%	—%	10%	2%
France	(24)%	—%	9%	(15)%
Canada	34%	—%	8%	41%
Rest of Developed International	32%	—%	15%	47%
Emerging	17%	—%	16%	34%
Mexico	13%	—%	(3)%	10%
Poland	6%	—%	18%	24%
Brazil	34%	—%	6%	39%
Chile	91%	—%	—%	91%
Rest of Emerging	14%	—%	32%	47%
Travel Retail	77%	—%	8%	85%
Non-branded and bulk	7%	23%	1%	32%
Total	11%	—%	6%	17%

Note: Totals may differ due to rounding

Schedule D
Brown-Forman Corporation Supplemental Geographic, Product, and Operations Information (Unaudited) Three Months Ended July 31, 2022

	Estimated Net Change in Distributor Inventories³
Geographic Area³ – Net Sales
United States	5%
Developed International	2%
Emerging	8%
Travel Retail	25%
Non-Branded and Bulk	—%
Brand³ – Net Sales
Whiskey	9%
JDTW	5%
JDTH	22%
Gentleman Jack	15%
JDTF	24%
JDTA	(14)%
Woodford Reserve	21%
Old Forester	17%
Rest of Whiskey	(3)%
Ready-to-drink	—%
JD RTD/RTP	—%
New Mix	—%
Tequila	(4)%
Herradura	6%
el Jimador	(5)%
Wine	(12)%
Vodka (Finlandia)	(6)%
Rest of Portfolio	23%
Non-branded and bulk	—%
Statement of Operations Line Items
Net Sales	5%
Cost of Sales	2%
Gross Profit	7%
Operating Income	13%

A positive difference is interpreted as a net increase in distributors’ inventories; whereas, a negative difference is interpreted as a net decrease in distributors’ inventories.

Note: Totals may differ due to rounding

Note 1 – Percentage growth rates are compared to the same prior-year periods, unless otherwise noted.

Note 2 – Non-GAAP Financial Measures

Use of Non-GAAP Financial Information. We use some financial measures in this report that are not measures of financial performance under U.S. generally accepted accounting principles (GAAP). These non-GAAP measures, defined below, should be viewed as supplements to (not substitutes for) our results of operations and other measures reported under GAAP. Other companies may not define or calculate these non-GAAP measures in the same way. Reconciliations of these non-GAAP measures to the most closely comparable GAAP measures are presented on Schedules A, B, and C of this press release.

“Organic change” in measures of statements of operations. We present changes in certain measures, or line items, of the statements of operations that are adjusted to an “organic” basis. We use “organic change” for the following measures of the statements of operations: (a) organic net sales; (b) organic cost of sales; (c) organic gross profit; (d) organic advertising expenses; (e) organic selling, general, and administrative (SG&A) expenses; (f) organic other expense (income) net; (g) organic operating expenses*; and (h) organic operating income. To calculate these measures, we adjust, as applicable, for (1) acquisitions and divestitures, (2) foreign exchange, and (3) impairment charges. We explain these adjustments below.

“Acquisitions and divestitures.” This adjustment removes (a) the gain or loss recognized on sale of divested brands, (b) any non-recurring effects related to our acquisitions and divestitures (e.g., transaction, transition, and integration costs), and (c) the effects of operating activity related to acquired and divested brands for periods not comparable year over year (non-comparable periods).

Contacts

ROB FREDERICK

VICE PRESIDENT

CORPORATE COMMUNICATIONS

502-774-7707

SUE PERRAM

DIRECTOR

INVESTOR RELATIONS

502-774-6862

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