Alcoholic beverage manufacturer Brown-Forman Corp. (BF-B, BF-A) reported Wednesday a profit for the first quarter that increased five percent from last year, reflecting improved gross margins and sales growth.
Both earnings per share and quarterly net sales missed analysts' expectations. The company also reaffirmed its earnings and revenue growth guidance for the full-year 2015.
Brown-Forman sells more than 35 brands, including Jack Daniel's and Canadian Mist as well as Finlandia Vodka, Southern Comfort Liqueur, Sonoma-Cutrer wines, Don Eduardo Tequilas, and Korbel California Champagnes.
"As anticipated, our first quarter growth came in lower than what we achieved during fiscal 2014 and our expectations for fiscal 2015, due largely to pricing decisions that resulted in distributor and retail inventory reductions in the United States and Europe," CEO Paul Varga said in a statement.
The Louisville, Kentucky-based company reported net income of $150 million or $0.70 per share for the first quarter, 5 percent higher than $143 million or $0.66 per share in the prior-year quarter.
On average, 12 analysts polled by Thomson Reuters expected the company to report earnings of $0.72 per share for the quarter. Analysts' estimates typically exclude special items.
Net sales for the quarter increased 3 percent to $921 million from $896 million in the same quarter last year, but missed five Wall Street analysts' consensus estimate of $933.86 million.
Woodford Reserve underlying sales were up 29 percent, confirming strong demand for more expensive super and ultra-premium whiskey.
Geographically, underlying net sales in the U.S. were flat. Underlying sales in developed markets outside of the U.S. decreased 1 percent, with double-digit declines in the U.K. and Germany. However, Australia, Canada, Belgium, France and Netherlands registered solid gains in the quarter.
Underlying net sales grew 15 percent in the emerging markets, with double-digit sales growth in Turkey, Russia, Brazil, and Indonesia.
Global travel retail reported 22 percent underlying net sales growth, driven by price increases, successful innovation, and new product launches.
Operating margin for the quarter contracted 30 basis points to 23.9 percent from last year's 24.2 percent, despite gross margin improvement of 40 basis points to 53.7 percent from last year, as selling, general, and administrative expenses increased 9 percent.
"We anticipate higher rates of sales growth over the balance of the year, led by Jack Daniel's and our portfolio of premium whiskey brands. We reaffirm our full-year guidance and our expectations of 9-11% underlying operating income growth in fiscal 2015," Varga added.
Looking ahead to fiscal 2015, Brown-Forman continues to expect earnings in a range of $3.25 to $3.45 per share, on projected 6 to 8 percent growth in reported and underlying net sales. Street is currently looking for full-year 2015 earnings of $3.36 per share on annual revenue growth of 7.8 percent to $4.25 billion.
BF-A closed Tuesday's regular trading session at $93.09, up $0.09 on a volume of 14,400 shares, while BF-B closed at $92.24, down $1.17 on a volume of 0.61 million shares.
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