Brown-Forman, the maker of Jack Daniel’s, experienced a quarterly earnings disappointment on Wednesday. This was primarily due to elevated input costs and lackluster demand for their more premium whiskey offerings like Woodford Reserve and Gentleman Jack in the U.S.
The company’s shares dipped by up to 6%, hitting a two-month nadir, because its first-quarter net sales also slightly missed the predictions set by analysts.
The spirits manufacturer faced the impact of elevated input expenses, encompassing agave, grains, and wood, all while shipment volumes in the United States dropped due to wholesalers reducing their inventories.
Not accounting for exceptional items, Brown-Forman generated earnings of 48 cents per share, falling short of the projected profit of 53 cents per share, according to data from Refinitiv.
During the quarter, advertising expenditures witnessed a 19% increase, and overall costs rose by 14%, compounded by the challenges posed by a challenging labor market.
Confronted with supply chain disruptions and elevated input costs that reached their pinnacle in the previous fiscal year, the company implemented a year-on-year price hike of 2% to 3% on its spirits.
During a post-earnings call, Brown-Forman attributed a 90-basis-point increase in gross margin for the quarter to a 250-basis-point advantage resulting from increased pricing, along with a reduction in supply-chain expenses.
In the quarter under review, distributor inventories, which represent the stock held by wholesalers, witnessed an 11% decrease in the United States. This reduction played a role in the company’s net sales in the country declining by 8%.
In the quarter, its net sales experienced a 3% increase, reaching $1.04 billion, slightly below the average estimate of analysts at $1.05 billion.
However, Brown-Forman restated its yearly objective of achieving organic net sales growth within the range of 5% to 7%. The company also expressed anticipation that demand patterns will return to a more balanced state following two years of robust expansion.