Brown-Forman Corporation reported financial results for its fourth quarter and fiscal year ended April 30, 2022. For the fourth quarter, the company’s reported net sales of $996 million increased 23% (+27% on an organic basis). In the quarter, reported operating income increased 46% to $246 million (+62% on an organic basis) and diluted earnings per share increased 26% to $0.31.
For the full year, the company’s reported net sales increased 14% to $3,933 million (+17% on an organic basis). Reported operating income increased 3% to $1,204 million (+27% on an organic basis) in the fiscal year, while diluted earnings per share decreased 7% to $1.74 primarily due to higher income taxes partially offset by the increase in reported operating income. Earnings per share in fiscal 2021 included an estimated $0.20 per share benefit from the gain on the sale of the Early Times, Canadian Mist, and Collingwood brands and related assets.
Lawson Whiting, Brown-Forman’s President and Chief Executive Officer stated, “I am proud of our exceptional results, our strategic progress, and yet another year of growth despite numerous headwinds. We achieved these results due in large part to the resurgence of Jack Daniel’s Tennessee Whiskey, which experienced strong consumer demand as the on-premise channel reopened around the world. Equally important, we believe we are well-positioned for continued growth in the fiscal year ahead given our strategic initiatives and our talented teams.”
Fiscal 2022 Highlights
- Reported net sales grew 14% (+17% organic) building on our fiscal 2021 growth.
- All geographic clusters contributed meaningfully to strong reported net sales growth.
- Jack Daniel’s Tennessee Whiskey fueled overall company performance with 20% reported net sales growth (+23% organic).
- Premium bourbons, led by Woodford Reserve and Old Forester, grew reported net sales by 17% (+17% organic).
- The tequila portfolio, driven by Herradura and el Jimador, grew reported net sales by 22% (+20% organic).
- The gross margin expanded 30 basis points.
- Reported advertising expense increased 10% (+11% organic) as we continued to invest for growth across the brand portfolio.
- Returned $831 million to stockholders, which included a special cash dividend of $1 per share, or approximately $480 million, and $351 million in regular dividends.
Fiscal 2022 Brand Results
- The Jack Daniel’s family of brands delivered double-digitreportednet sales growth of 15% (+17% organic) fueled by a strong, broad-based resurgence of Jack Daniel’s Tennessee Whiskey, reflecting higher volumes and a favorable channel mix shift to the on-premise channel. An estimated net increase in distributor inventories positively impacted reported net sales. Further gains for the Jack Daniel’s family of brands were delivered by the continued international launch of Jack Daniel’s Tennessee Apple and the international growth of Jack Daniel’s RTDs. Supply chain disruptions adversely impacted fiscal 2022 results for Jack Daniel’s Tennessee Whiskey, Jack Daniel’s Tennessee Honey, and Jack Daniel’s Tennessee Fire.
- Premium bourbons, propelled by Woodford Reserve and Old Forester, delivered 17% reported net sales growth (+17% organic). Gains for Woodford Reserve, the leader by volume and value in the super-premium American whiskey category, were driven by higher volumes and pricing in the United States and higher volumes in the Travel Retail channel. Woodford Reserve’s reported net sales were negatively impacted by supply chain disruptions. Old Forester sustained double-digit reported net sales growth and surpassed 400,000 nine-liter cases in fiscal 2022.
- Our tequilas delivered double-digit reported net sales growth of 22% (+21% organic) driven by the broad-based growth of Herradura and el Jimador, led by the United States.
Fiscal 2022 Market Results
- The company delivered strong, broad-based reported net sales growth across all geographic clusters and the Travel Retail channel. Supply chain disruptions had an adverse effect on results.
- Reported net sales in the United States grew 10% (+12% organic) led by Jack Daniel’s Tennessee Whiskey, higher volumes and price increases for our premium bourbons, Woodford Reserve, and Old Forester, and volumetric growth of Herradura and el Jimador. An estimated net increase in distributor inventories positively impacted reported net sales. Reported net sales growth was partially offset by the effect of acquisitions and divestitures in the prior year along with lower volumes for Jack Daniel’s Tennessee Honey, which was adversely impacted by supply chain disruptions.
- Developed international markets grew reported net sales by 12% (+16% organic) with broad-based volumetric growth from Jack Daniel’s Tennessee Whiskey and higher volumes and prices of Jack Daniel’s RTDs. An estimated net increase in distributor inventories positively impacted reported net sales. Reported net sales growth was partially offset by the negative effect of foreign exchange.
- Emerging markets grew reported net sales by 24% (+29% organic) reflecting the broad-based growth of Jack Daniel’s Tennessee Whiskey and the continued international launch of Jack Daniel’s Tennessee Apple, partially offset by the negative effect of foreign exchange. An estimated net increase in distributor inventories positively impacted reported net sales.
- The Travel Retail channel bounded with reported net sales growth of 65% (+67% organic) as we cycled against significant declines during the same prior-year period.
Fiscal 2022 Other P&L Items
- Reported gross profit increased 14% (+17% organic). Gross margin expanded 30 basis points to 60.8%, driven primarily by favorable price/mix and the effect of acquisitions and divestitures, largely offset by higher costs.
- Reported advertising expenses increased 10% (+11% organic) as the company continued to fuel momentum and invest for future growth. Reported selling, general, and administrative expenses increased 3% (+7% organic) due to higher discretionary spending and one-time items including a special employee bonus and costs related to the impact of Russia’s invasion of Ukraine.
- During the fourth quarter, we recognized a $52 million non-cash impairment charge for our Finlandia brand name. The impairment reflects a decline in our long-term outlook for Finlandia due to our suspension of operations in Russia, a key market for the brand.
- The company’s reported operating income increased by 3% (+27% organic).
Fiscal 2022 Financial Stewardship
- During fiscal 2022, the company returned nearly $831 million to stockholders through its regular quarterly dividend as well as a $480 million special dividend paid during the third quarter of fiscal 2022. Brown-Forman, a member of the prestigious S&P 500 Dividend Aristocrats index, has paid regular quarterly cash dividends for 78 consecutive years and has increased the regular dividend for 38 consecutive years.
The fiscal Year 2023 Outlook
The company anticipates continued growth in fiscal 2023 despite global macroeconomic and geopolitical uncertainties. Accordingly, we expect the following in fiscal 2023:
- With the strength of our portfolio of brands and strong consumer demand, we expect organic net sales growth in the mid-single-digit range.
- Considering the net effect of inflation and the removal of the EU and UK tariffs on American whiskey, we project the reported gross margin to expand slightly.
- Based on the above expectations, we anticipate mid-single-digit organic operating income growth.
- We expect our fiscal 2023 effective tax rate to be in the range of approximately 22% to 23%.
- Capital expenditures are planned to be in the range of $190 to $210 million.
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