CORRECTING and REPLACING Brown-Forman Reports First Quarter Fiscal 2024 Results; Reaffirms Full Year Outlook

LOUISVILLE, Ky.–(BUSINESS WIRE)–Schedule D Supplemental Information should read: Developed International (3%), Emerging 1%, Travel Retail 3% (instead of Developed International 1%, Emerging 3%, Travel Retail (1%).)

The updated release reads:

BROWN-FORMAN REPORTS FIRST QUARTER FISCAL 2024 RESULTS; REAFFIRMS FULL YEAR OUTLOOK

Brown-Forman Corporation (NYSE: BFA, BFB) reported financial results for its first quarter of fiscal 2024 ended July 31, 2023, with reported net sales increasing 3%¹ to $1.0 billion (+2% on an organic basis²). In the quarter, reported operating income decreased 4% to $327 million (-6% on an organic basis) and diluted earnings per share decreased 7% to $0.48.

Lawson Whiting, Brown-Forman’s President and Chief Executive Officer stated, “As anticipated, our first quarter growth was impacted by the difficult shipment comparison from fiscal 2023, when we rebuilt inventory impacted by prior glass supply challenges. We continue to be confident in the strength of our people, our brands, and our business, and reaffirm our full-year fiscal 2024 guidance of 5-7% organic net sales growth and 6-8% organic operating income growth.”

First Quarter of Fiscal 2024 Highlights

• Broad-based reported net sales growth was delivered across Emerging³ and Developed International³ markets and the Travel Retail³ channel. Reported net sales declined in the United States reflecting an estimated net decrease in distributor inventories, partially due to cycling against a significant inventory rebuild during the same period last year.
• On a reported basis, portfolio growth was led by:
  • The recently acquired Gin Mare and Diplomático brands which collectively increased the company’s reported net sales by 2%,
  • New Mix RTD which delivered very strong reported net sales growth of 52% (+32% organic),
  • el Jimador with reported net sales growth of 27% (+26% organic), and
  • Jack Daniel’s Tennessee Apple with double-digit reported net sales growth of 49% (+52% organic).
• Reported gross margin expanded 90 basis points.
• Significant brand investment supporting the existing portfolio, the launch of Jack Daniel’s & Coca-Cola RTD, and the recent acquisitions of Gin Mare and Diplomático increased reported advertising expense 19% (+14% organic).

First Quarter of Fiscal 2024 Brand Results

• Reported net sales for Whiskey³ products declined 1% (flat organic) led by Woodford Reserve and Gentleman Jack due to an estimated net decrease in distributor inventories, partially offset by the growth of Jack Daniel’s Tennessee Apple and Jack Daniel’s super-premium expressions such as Jack Daniel’s Sinatra and Jack Daniel’s Bonded. While reported net sales of Jack Daniel’s Tennessee Whiskey was flat, the brand led the company’s organic growth (+2%) even as it was negatively impacted by an estimated net decrease in distributor inventories in the United States.

• Ready-to-Drink³ (RTD) growth continued to be driven by consumer preference for convenience and flavor. New Mix’s reported net sales increased 52% (+32% organic) propelled by higher volumes and prices along with the positive effect of foreign exchange. Reported net sales of Jack Daniel’s RTD/RTP portfolio was flat (flat organic) due to lower volumes of Jack Daniel’s & Cola as we launched the Jack Daniel’s & Coca-Cola RTD.

• Reported net sales for the tequila portfolio increased 15% (+12% organic). el Jimador fueled the growth with reported net sales of 27% (+26% organic) driven by higher prices, particularly in the United States, and higher volumes in Colombia. Herradura increased reported net sales 1% (-3% organic) as the positive effect of foreign exchange was largely offset by lower volumes in the United States, reflecting an estimated net decrease in distributor inventories.

• Gin Mare and Diplomático drove the significant increase in Rest of Portfolio’s³ reported net sales growth of 97% (+5% organic).

First Quarter of Fiscal 2024 Market Results

• Emerging³ marketsgrew reported net sales 27% (+32% organic) reflecting very strong growth of New Mix in Mexico and Jack Daniel’s Tennessee Whiskey in the United Arab Emirates and Poland.

• Developed International³ markets’ reported net sales increased 5% (flat organic) fueled by Gin Mare and Diplomático in Italy along with the launch of Jack Daniel’s Tennessee Apple in South Korea. Growth was partially offset by lower volumes of Jack Daniel’s RTDs in the United Kingdom and Australia.

• The Travel Retail³ channel sustained strong growth with reported net sales increasing 13% (+9% organic) driven primarily by higher volumes of Woodford Reserve as well as Jack Daniel’s super-premium expressions such as Jack Daniel’s Single Barrel Tennessee Whiskey.

• Reported net sales in the United States decreased 8% (-9% organic). The decline was driven by lower volumes reflecting an estimated net decrease in distributor inventories, partially offset by higher prices across the portfolio led by Jack Daniel’s Tennessee Whiskey. The estimated net decrease in distributor inventories was partially due to cycling against a significant inventory rebuild during the same period last year as we continued to recover from supply chain disruptions.

First Quarter of Fiscal 2024 Other P&L Items

• Reported gross profit increased 5% (+5% organic). Gross margin expanded 90 basis points to 62.7%, driven by favorable price/mix, lower supply chain disruption related costs and lower tariff-related costs, which was partially offset by higher input costs and the negative effect of foreign exchange.

• Reported advertising expense grew 19% (+14% organic) driven by the launch of Jack Daniel’s & Coca-Cola RTD, increased investment in Jack Daniel’s Tennessee Whiskey, and the acquisitions of Gin Mare and Diplomático. Reported selling, general, and administrative expenses increased 14% (+12% organic) largely driven by higher compensation-related expenses.

• The company’s reported operating income decreased by 4% (-6% organic) due to the timing of higher operating expense, partially offset by gross margin expansion.

• Diluted earnings per share declined by $0.04 driven primarily by the decrease in reported operating income and higher interest expense.

First Quarter of Fiscal 2024 Financial Stewardship

On July 27, 2023, the Brown-Forman Board of Directors declared a regular quarterly cash dividend of $0.2055 per share on its Class A and Class B common stock. The dividend is payable on October 2, 2023, to stockholders of record on September 5, 2023. 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

While we remain optimistic about our prospects for growth of organic net sales and organic operating income in fiscal 2024, we continue to believe trends will normalize after two consecutive years of double-digit organic net sales growth. Accordingly, we reiterate our guidance and 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, Chambord, Fords Gin, Gin Mare, and Diplomático Rum. Brown-Forman’s brands are supported by approximately 5,600 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 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; 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 those described in future reports 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.

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.

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.

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 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 press release 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.

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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