Brown-Forman (BF.B)
The Brown-Forman Corporation (BF.B: Charts, News, Offers), maker of Jack Daniel’s whiskey, reported that its third quarter profit dropped while overall sales grew. The liquor distiller cited an expected increase in expenses as the reason for the dip in profit. However, Brown-Forman also scaled back its full-year earnings forecast for 2010. The Brown-Forman Corporation is an established and seasoned veteran of the alcohol industry. What has caused one of the largest American-owned spirits and wine companies to take such a cautious stance towards its future performance?
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There are a variety of reasons for Brown-Forman’s yearly forecast readjustment. For starters, the economic climate has been very difficult for alcoholic beverage companies. Consumers have been visiting bars and restaurants less frequently during the economic downturn, and it seems that the recent economic climate has really forced people to cut back on discretionary spending. Unfortunately, the economic implications don’t stop there for Brown-Forman. The liquor distiller has also noticed a growing trend of consumers downgrading to cheaper liquors to help save money. Neither less-packed bars nor cheaper liquor preferences sit well for a premium alcohol vendor. However, Brown-Forman has other motivating factors for its conservative outlook.
The floundering economy has been an inconvenience, to say the least, for the Brown-Forman Corporation. Yet, despite the economy, Brown-Forman has still managed to report a sales growth. Jack Daniel’s, el Jimador, and Gentlemen Jack showed positive sales trends, and retained a strong brand presence in their respective markets. Brown-Forman’s top selling brands were the primary reason for the overall third quarter sales increase as they outpaced the struggling brands’ decline in sales. Brown-Forman has been around long enough to know that it cannot ignore the poor performers. Southern Comfort and Finlandia are important brands for the liquor distiller and both experienced a drop in sales.
The Brown-Forman Corporation is very pleased with its ability to generate overall sales growth, but it realizes that the current economy will be an obstacle throughout the rest of the fiscal year. The company was also dinged for a non-cash trademark impairment charge of $11.6 million for its Don Eduardo tequila brand. In addition, Brown-Forman is aware that increased competition and transportation costs may lead to hinder profit performance. The liquor distiller seems to have a good pulse on its business environment and has adjusted its forecast accordingly. Brown-Forman is hoping to maintain the success of its top performers while turning around its SoCo and Finlandia brands.
Other News About Brown-Forman
- Line Upgrade Accommodates Redesigned Gentleman Jack Packaging – New cap design requires Brown-Forman to upgrade its bottling plant, which is something it doesn’t do too often.
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