Brown-Forman Organic Sales Turn Down 1% After Growth
The spirits maker posted $911 million in first-quarter net sales and reaffirmed a plan for roughly flat organic revenue in fiscal 2027.
Brown-Forman Corporation (BFA) reversed a quarter of organic growth as reported net sales fell 1% to $911 million in the three months ended July 31, 2026, and organic sales declined 1% as well. The immediately preceding quarter had shown a 2% reported increase to $912 million and 2% organic growth. President and Chief Executive Officer Lawson Whiting said first-quarter results were largely in line with expectations and that innovation, New Mix, and Jack Daniel’s Tennessee Blackberry helped offset pressures elsewhere.
The spirits maker said the sales decline was driven by the end of the Korbel relationship, lower used-barrel sales, and a weaker tequila portfolio, partially offset by Ready-to-Drink growth led by New Mix. Rest of Portfolio net sales declined 35% on a reported basis, or 12% organically, as the Korbel relationship ended. Non-branded and bulk sales decreased 61% due to lower used-barrel sales. Whiskey net sales were flat on both a reported and organic basis, after a 3% reported increase in the prior quarter. The company said the continued international launch of Jack Daniel’s Tennessee Blackberry was offset by declines in Jack Daniel’s Tennessee Honey and Gentleman Jack, while Jack Daniel’s Tennessee Whiskey was flat.
Ready-to-Drink net sales increased 20%, or 11% organically, faster than the 11% reported increase in the prior quarter. New Mix rose 48%, or 36% organically, after 41% reported growth in the prior quarter. The company attributed the New Mix increase to strong consumer demand in Mexico, the positive effect of foreign exchange, and the product’s launch in the United States. Tequila net sales decreased 12%, or 13% organically, after a 4% reported decline in the prior quarter. Herradura fell 17% on a reported basis, or 18% organically, on lower U.S. volumes and lower net pricing in Mexico. El Jimador declined 10%, or 11% organically, on lower U.S. net pricing.
Geographically, United States net sales declined 3% and were flat organically. The company cited the end of the Korbel relationship, an estimated net decrease in distributor inventories reflecting prior-year distributor transitions, and lower volumes of Jack Daniel’s Tennessee Blackberry, partially offset by higher volumes of Jack Daniel’s Tennessee Whiskey and the impact of the JDCC transition. Developed International net sales declined 6%, or 8% organically, on lower volumes of Jack Daniel’s Tennessee Whiskey in Germany, France, and Spain. Emerging markets increased 11%, or 9% organically, with Mexico up 26% on a reported basis and 15% organically, fueled by New Mix. Travel Retail declined 1%.
Gross margin expanded 40 basis points to 60.2%. The company said lower costs and the end of the Korbel relationship drove the expansion, partially offset by the negative effect of foreign exchange and unfavorable price/mix. Operating income decreased 3% to $252 million, or rose 4% organically. Operating margin decreased 50 basis points to 27.7%. Diluted earnings per share increased 6% to $0.38. The company said the $0.02 increase in diluted earnings per share was driven by lower non-operating postretirement expense and the accretive impact of share repurchases executed in the prior year, partially offset by the decrease in operating income. Advertising expense decreased 5%. Selling, general, and administrative expenses increased 4%, which the company attributed to the timing of costs related to targeted organizational realignments.
Cash flows from operations grew $13 million to $173 million, and free cash flow increased $32 million to $161 million. The company said operating cash flow rose primarily on higher net income and disciplined working-capital management, and that free cash flow rose on strong operating cash flow and lower capital-expenditure needs. It repaid $343 million principal amount of 1.20% senior notes on July 7, 2026. Cash and cash equivalents were $301 million at July 31, 2026. The board declared a regular quarterly cash dividend of $0.2310 a share, payable October 1, 2026.
Brown-Forman reaffirmed its fiscal 2027 outlook. The company said it anticipates the operating environment to remain challenging, with macroeconomic pressures and geopolitical instability continuing to negatively affect consumer behavior and beverage alcohol consumption, particularly in developed markets. It expects organic net sales to be approximately flat and organic operating income to decline in the 3% to 5% range. Capital expenditures are planned in the range of $60 million to $70 million.