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Brown-Forman's Challenging First-Quarter Setup Likely Pressured Revenue, RBC Says

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Brown-Forman's Challenging First-Quarter Setup Likely Pressured Revenue, RBC Says

Brown-Forman's (BF.A, BF.B) challenging fiscal first-quarter setup likely pressured its top-line amid a tough comparison and cautious consumer sentiment, RBC Capital Markets said in a note e-mailed Tuesday.

The wine and spirits maker is scheduled to release its quarterly results on Wednesday.

RBC is projecting revenue of $919.4 million, down from $924 million a year earlier, while analysts in the FactSet survey are looking for about $915 million. The brokerage expects adjusted earnings per share of $0.37, matching the FactSet-polled consensus, compared with $0.36 a year ago.

The first-quarter setup for the parent of Jack Daniel's whiskey includes the "toughest revenue comparison of the year" as Brown-Forman laps the initial US launch of JD Tennessee Blackberry and a major US distributor transition, RBC co-head of global consumer and retail research Nik Modi said.

"Overall, we remain cautious on (Brown-Forman) as the company works through the burden of lapping Blackberry load-in and distributor transitions, with still muted category dynamics, and mounting consumer pressures," Modi wrote.

Distributors are concerned about Brown-Forman's "ability to lap the strong launch of Jack Daniels Blackberry" and expect increased promotional activity in the spirits market over the coming months.

"Peer reads and our distributor checks confirm a challenged US spirits backdrop with subdued consumer confidence and affordability pressures," Modi said.

Brown-Forman's competitors Diageo and Pernod Ricard have reported "severe US spirits headwinds," according to RBC.

Last week, a survey by the University of Michigan showed that US consumer sentiment dropped in August amid concerns that inflation will continue to be high for the "foreseeable future." The Conference Board separately said that consumer confidence fell in August with a "more pessimistic" outlook for business conditions and the labor market ahead.

In June, Brown-Forman said it anticipated fiscal 2027 organic sales to be roughly flat after the metric was unchanged for the year ended April 30. The Street is looking for reported sales of $3.95 billion for the ongoing fiscal year.

Molson Coors Beverage (TAP) last month reported a 3.3% annual drop in second-quarter net sales as heightened global macroeconomic headwinds weighed on consumer behavior.

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