Brown-Forman profits dip but JD demand stays strong

Brown-Forman has seen its first quarter profits drop “as anticipated” despite the continued demand for top-performing Jack Daniel’s.

Although demand for Jack Daniel’s stayed strong, Brown Forman’s net profits slipped 3%

Announcing its Q1 financial results, the US drinks company posted a sales increase of 2% to $896 million, but this was not enough to mitigate a 3% drop in net income from $147 million to $143 million.

This result was seen to compare negatively to last year’s strong Q1 results, which benefited from distributor and retailer buy-ins made prior to price increases on top selling Brown-Forman products.

According to the Brown-Forman, the most recent Q1 results have also been adversely affected by unfavourable currency exchange rates, but sales in its core whiskey have remained pertinent.

Jack Daniels grew overall underlying sales 7% while sales of Jack Daniel’s Tennessee Honey grew 26% and maintained solid international progression.

Southern Comfort’s family of brands experienced a 2% decline in underlying sales which has been largely attributed to increased competition in on-premise consumption.

While underlying sales in the UK, Germany and France were described as “particularly strong” with double-digit growth, sales in Australia declined 5% due to a “challenging market and economic conditions”.

Brown-Forman increased its advertising and promotional spend by 12%, investing heavily in Southern Comfort media, launch support for Jack Daniel’s Tennessee Honey and the Gentleman Jack’s ‘Order of the Gentleman’ campaign in the US.

Paul Varga, chief executive officer for Brown-Forman, said: “Our first quarter unfolded largely as anticipated, and we believe Brown-Forman remains on track to deliver the fiscal 2014 full year outlook we shared with you last quarter.

“We expect a strong second quarter against last year’s soft comparables, when trade inventories came back into balance after the first quarter price increase buy-ins. We are confirming our full year growth outlook and remain encouraged by the global consumer’s continuing interest in premium whiskey.”

The company is expecting more favourable results for the second quarter.