Brown-Forman posts slightly lower sales and profit in Q2 amid currency headwinds

U.S. spirits maker Brown-Forman Corp on Wednesday reported a 2.8% revenue decline in the second quarter and 4% drop for the half-year, citing the sale of two liquor brands, Southern Comfort and Tuaca, as well as adverse currency conditions for the shortfall.

As anticipated, our reported earnings were impacted noticeably in the first half by the absence of the brands we sold in late fiscal year 2016, as well as by adverse foreign exchange,” Brown-Forman CEO Paul Varga said.

The company in January sold its struggling sweet whiskey-flavored liquor, Southern Comfort, and Tuaca, an Italian liqueur, for $543.5 million to Sazerac Co. It was part of Brown-Forman’s refocus on its flagship brands, Jack Daniel’s and Woodford Reserve, which have grown in recent years amid a revival in American whiskey sales. In April it purchased the BenRiach Distillery Company Ltd in Scotland for $416 million to expand its Scotch whisky portfolio.

The company said net revenue after excise taxes fell to $830, while net profit declined to $197m, from $200m in the same period last year.

The maker of Jack Daniel’s Tennessee Whiskey suffered a 9% sales decline in emerging markets due to weaker economic conditions and devalued currencies, leading to lower purchasing power. However, sales in Poland and Mexico, two of its largest emerging markets climbed 3%, while sales in other emerging markets – Turkey, Russia, Brazil and China fell.

In the U.S., sales fell 1% and 5% in other developed international markets. However, the company witnessed strong sales momentum in various Jack Daniel’s versions in the U.S. including Tennessee Whiskey, Tennessee Honey and Gentleman Jack. International sales were hurt due to holiday season promotions in the U.K. and “key customer buying patterns” in Germany, the company said.

Brown-Forman adjusted its sales forecast for the rest of the year downwards by 1%, saying it expects revenue to grow between 4% and 5% this year. However, the spirits maker said it was standing by its adjusted earnings per share guidance of between $1.71 to $1.81.

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