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Drinks

Jack Daniel's Parent Sees Flat Sales In First Quarter, Impacted By Tariffs

By Steve Wynne-Jones
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Jack Daniel's Parent Sees Flat Sales In First Quarter, Impacted By Tariffs

Brown-Forman Corporation, the parent company of Jack Daniel's, has posted flat sales for the first quarter of its financial year, with the business saying that international trade tariffs impacted its performance, particularly in Europe.

The company posted net sales of $766 million for the period, while gross profit was down 5% to $498 million.

“Our first quarter results came in largely as anticipated considering the year-over-year drag from tariffs and timing of customer orders," commented Lawson Whiting, the company's president and chief executive.

"We believe we remain on track to deliver another year of solid underlying net sales and underlying operating income growth driven by the Jack Daniel’s family of brands."

Regional Performance

The group said that it posted underlying net sales growth of 4% (6% on a reported basis) in its largest market, the United States, which was driven by double-digit growth from its premium bourbons, including Woodford Reserve and Old Forester.

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The Jack Daniel's family of brands grew underlying net sales in the low-single digits in the US during the quarter, it said.

In developed international markets, underlying net sales fell 3% (5% on a reported basis), with growth suppressed by approximately six points due to tariff-related buy-ins last year and net pricing reductions, the company said.

The UK and Germany saw a particular decline in underlying net sales, of 14% (-21% reported) and 9% (-6% reported), respectively, which was influenced 'significantly' by tariffs. However, France saw sales up 6% (7% reported).

In emerging markets, underlying net sales were up 3% (1% reported), with the growth surpassed by around three percentage points due to tariffs. Positives included Mexico, which saw sales up 3% (6% reported), Brazil, which reported sales up 7% (14%) and China and India, which produced strong double-digit underlying net sales growth, led by Jack Daniel’s, the company said.

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Tariff Troubles

The company is one of several US distillers that has been impacted by retaliatory tariffs, responding to US President Donald Trump's trade battles with many countries and regions around the globe.

Earlier this month, the Distlled Spirits Council said that some 63% of US whiskey exports faced tariffs from markets including the European Union, China, Turkey, Mexico and Canada. The EU, for example, currently levies 25% tariffs on American whiskey.

Whiting said that the company is seeking to 'absorb' some of the tariff impact through focusing on the firm's growth areas.

“We continue to invest behind the momentum of our business, by not only absorbing much of the tariff costs, but thoughtfully re-allocating and reinvesting back into our brands and our people, including the recent announcement of establishing our own distribution platform in the United Kingdom," he said. "We believe that investing in momentum will position us well for the next generation of growth and continue to deliver superior returns for our shareholders.”

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Looking ahead to the coming year, Brown-Forman said that 'growing uncertainty' and a 'competitive environment' at both home and overseas was likely to impact its performance.

It anticipates underlying net sales growth of 5% to 7% and underlying operating income growth of 3% to 5% in fiscal year 2020.

© 2019 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: European Supermarket Magazine.

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