Brown-Forman Reports Strong Broad-Based Fiscal 2023 Net Sales Growth

LOUISVILLE, Ky.–(BUSINESS WIRE)–Brown-Forman Corporation (NYSE: BFA, BFB) reported financial results for its fourth quarter and fiscal year ended April 30, 2023. For the fourth quarter, reported net sales increased 5%¹ to $1.0 billion (+4% on an organic basis²). In the quarter, reported operating income increased 21%¹ to $298 million (+3% on an organic basis) and diluted earnings per share increased 36% to $0.43 in the quarter.

For the full year, reported net sales increased 8% to $4.2 billion (+10% on an organic basis). Reported operating income decreased 6% to $1.1 billion (+8% on an organic basis) in fiscal 2023 reflecting lower gross margin, higher non-cash impairment charges (largely related to the Finlandia brand name), and higher operating expenses, including certain post-closing expenses in connection with the acquisitions of Diplomático and Gin Mare. Diluted earnings per share decreased 7% to $1.63 due to the decrease in reported operating income and higher pension settlement charges, partially offset by the benefit of a lower effective tax rate.

Lawson Whiting, Brown-Forman’s President and Chief Executive Officer stated, “In fiscal 2023, Brown-Forman continued its tradition of delivering strong organic top and bottom line growth. We were able to build on last year’s double-digit organic net sales growth by continuing the premiumization of our portfolio, investing boldly in our brands, building new strategic relationships, developing and supporting our talented people, and honoring our values. As we turn our focus to fiscal 2024, I believe we can grow on this elevated foundation and continue to deliver Nothing Better in the Market.”

Fiscal 2023 Highlights

• Delivered broad-based reported net sales growth across all geographic clusters and the Travel Retail channel driven by strong consumer demand and favorable price/mix, partially offset by the negative effect of foreign exchange.
• Portfolio growth was led by:
  • Continued very strong double-digit growth of Woodford Reserve as reported net sales increased 26% (+27% organic).
  • Jack Daniel’s Tennessee Whiskey with reported net sales growth of 3% (+8% organic).
  • Jack Daniel’s Ready-to-Drink (RTD)/Ready-to-Pour (RTP)³ with double-digit reported net sales growth of 11% (+16% organic) fueled by the launch of the Jack Daniel’s & Coca-Cola RTD in the United States.

• Reported gross margin contracted 180 basis points driven by inflation, supply chain disruption costs, and foreign exchange, partially offset by favorable price/mix and the removal of the European Union and United Kingdom tariffs on American whiskey.
• Strongly invested behind our brands to support long-term growth with an increase in reported advertising expense of 15% (+18% organic).
• Acquired the number one ultra-premium gin, Gin Mare, and the number one super- and ultra- premium rum, Diplomático (IWSR 2022).
• Returned $378 million to stockholders through the regular quarterly dividend.

Fiscal 2023 Brand Results

• The Jack Daniel’s family of brands’³ reported net sales growth of 4% (+9% organic) was led by Jack Daniel’s Tennessee Whiskey in international markets and the Travel Retail channel. Higher pricing and an estimated net increase in distributor inventories in certain emerging and developed international markets positively impacted reported net sales. Jack Daniel’s RTD/RTP grew reported net sales 11% (+16% organic) driven by the introduction of the Jack Daniel’s & Coca-Cola RTD. In addition, reported net sales also benefited from innovation with the launch of Jack Daniel’s Bonded Tennessee Whiskey.
• Premium bourbons³, propelled by strong double-digit net sales growth from Woodford Reserve and Old Forester, delivered 23% reported net sales growth (+24% organic) driven by stronger consumer demand in the United States. Gains for Woodford Reserve were partially due to the estimated net increase in distributor inventories, while Old Forester’s growth was driven by higher volumes and pricing.
• Ready-to-Drinks³ (RTDs) growth continued to be driven by consumer preference for convenience and flavor. New Mix gained market share in Mexico as reported net sales grew 53% (+45% organic), fueled by higher volumes and prices.
• Reported net sales for the tequila portfolio increased 10% (+10% organic) with el Jimador and Herradura both delivering double-digit reported net sales growth. el Jimador grew reported net sales 13% (+14% organic) with broad-based growth across all geographic clusters, led by the Emerging markets and the United States. Herradura increased reported net sales 11% (+10% organic) driven by higher prices and volumes in Mexico and volumetric growth in the United States, partially due to an estimated net increase in distributor inventories.

Fiscal 2023 Market Results

• Reported net sales growth was broad-based across all geographic clusters and the Travel Retail channel reflecting the strength of the company’s premium portfolio of brands and strong consumer demand.
• Emerging³ markets’grew reported net sales 18% (+24% organic) driven by the growth of Jack Daniel’s Tennessee Whiskey, led by the United Arab Emirates and Brazil, and continued very strong double-digit growth in Mexico fueled by New Mix RTD.
• As trends began to normalize, reported net sales in the United States grew 3% (+3% organic). This growth was driven by higher volumes of Woodford Reserve partially reflecting an estimated net increase in distributor inventories, higher prices across the portfolio led by the Jack Daniel’s family of brands, and the launch of the Jack Daniel’s & Coca-Cola RTD. Lower volumes of Jack Daniel’s Tennessee Whiskey and Korbel California Champagne partially offset the growth due to an estimated net decrease in distributor inventories.
• Developed International³ markets’ reported net sales increased 4% (+10% organic) due to volumetric growth and higher prices of Jack Daniel’s Tennessee Whiskey, and higher volumes of Jack Daniel’s RTD. Reported net sales growth in Developed International markets was led by Germany, Japan, Italy, and Belgium.
• The Travel Retail channel sustained strong growth with a reported net sales increase of 41% (+43% organic) driven by higher volumes across much of the portfolio, led by Jack Daniel’s Tennessee Whiskey, as travel continued to rebound.

Fiscal 2023 Other P&L Items

• Reported gross profit increased 4% (+9% organic). Gross margin contracted 180 basis points to 59.0%, driven by the impact of inflation on input costs, costs related to supply chain disruptions, and the negative effect of foreign exchange. These declines were partially offset by favorable price/mix and the removal of the E.U. and U.K. tariffs on American whiskey.
• Reported advertising expense grew 15% (+18% organic) driven by increased investment to support Jack Daniel’s Tennessee Whiskey, Woodford Reserve, Herradura, the launch of Jack Daniel’s Bonded and the Jack Daniel’s & Coca-Cola RTD in the United States. Reported selling, general, and administrative expenses increased 8% (+9% organic), largely driven by higher compensation-related expenses, higher discretionary spend, and costs related to the acquisition and integration of the Gin Mare and Diplomático brands.
• In fiscal 2023, a non-cash impairment charge of $96 million was recognized for the Finlandia brand name. A $52 million non-cash impairment charge for the Finlandia brand name was also recognized in fiscal 2022. The company also incurred expenses of $43 million related to the termination of certain distribution contracts in connection with the acquisition of Diplomático and Gin Mare.
• The company’s reported operating income decreased by 6% (+8% organic).
• Diluted earnings per share in fiscal 2023 declined by $0.12 largely driven by the effect of the acquisitions of Diplomático and Gin Mare (estimated $0.08 per share), higher non-cash impairment charges, largely related to the Finlandia brand name (estimated $0.06 per share), and higher pension settlement charges (estimated $0.02 per share).

Fiscal 2023 Financial Stewardship

During fiscal 2023, the company returned nearly $378 million to stockholders through its regular quarterly dividend. Brown-Forman, a member of the prestigious S&P 500 Dividend Aristocrats index, has paid regular quarterly cash dividends for 79 consecutive years and has increased the regular dividend for 39 consecutive years.

Fiscal 2024 Outlook

We are optimistic about our prospects for growth of organic net sales and organic operating income in fiscal 2024. We believe trends will normalize after two consecutive years of double-digit organic net sales growth. Accordingly, we expect the following in fiscal 2024:

• Reflecting the strength of our portfolio of brands, our pricing strategy, and strong consumer demand, we expect organic net sales growth in the 5% to 7% range.
• Based on the above organic net sales growth outlook, and our expectation that continued input cost pressures will be partially offset by lower supply chain disruption costs, we anticipate organic operating income growth in the 6% to 8% range.
• We expect our fiscal 2024 effective tax rate to be in the range of approximately 21% to 23%.
• Capital expenditures are planned to be in the range of $250 to $270 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 more than 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 Ready-to-Drinks, 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, Fords Gin, Gin Mare, and Diplomático Rum. 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. Follow us on LinkedIn, Instagram and Twitter.

Important Information on Forward-Looking Statements:

This press release contain 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; 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
• Risks associated with acquisitions, dispositions, business partnerships, or investments – such as acquisition integration, termination difficulties or costs, or impairment in recorded value
• Impact of health epidemics and pandemics, and the risk of the resulting negative economic impacts and related governmental actions
• Unfavorable global or regional economic conditions 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 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, kidnapping, extortion, or other types of violence; 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 affecting 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.

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.

Note: Totals may differ due to rounding.

Contacts

Rob Frederick

Vice President

Corporate Communications

rob_frederick@b-f.com
502-774-7707

Sue Perram

Vice President

Investor Relations

sue_perram@b-f.com
502-774-6862

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