Brown-Forman Corporation Q3 FY2025 earnings call

Brand Performance - Woodford Reserve and Jack Daniel's are key growth drivers; RTDs show strength; new brands Diplomático and Gin Mare perform well; tequilas face challenges but have some positive launches. ### Route-to-Consumer Evolution - Japan distribution change on track; Italy launch in May 2025; selected Reyes Beverage Group as new distributor in California; valued relationship with RNDC in other states. ### Workforce Restructuring - Restructured executive team, reduced global workforce by ~12%, closed Louisville Cooperage; expected annualized savings of $70-80 million with $60-70 million in charges.

Woodford Reserve had organic net sales growth of 10% driven by higher volumes and positive price mix. Jack Daniel's Tennessee Whiskey saw organic net sales increase 2% year-to-date with sequential acceleration. RTDs like Jack & Coke and New Mix are performing well, with Jack & Coke outperforming the category and New Mix having double-digit organic net sales growth in 12 of the past 13 quarters. Diplomático and Gin Mare delivered double-digit organic net sales growth. Tequila brands El Jimador and Herradura faced challenges but had some positive launches.

Reaffirmed full year organic net sales and organic operating income outlook for fiscal 2025. Expect organic net sales growth in 2%-4% range, guiding closer to lower end; organic operating income growth in 2%-4% range, guiding to upper end. Estimated capital expenditures in $180-190 million range; effective tax rate outlook updated to 20%-22%.

• Tariffs: Uncertainty around tariffs, particularly with EU; key ask for reciprocal 0 for 0 tariffs. - Economic Conditions: Challenging macro environment in Mexico affecting discretionary spending; competitive tequila market. - Inventory: Distributor inventory trends and potential impacts on sales.

Q: Lauren Lieberman asks about preparing for a wave of small whiskey brands and Jack Daniel's brand health.

A: Lawson and Leanne discuss Jack Daniel's sequential improvement, music and McLaren sponsorships, and brand strategies.

Q: Nadine Sarwat asks about tequila pricing and U.S. spirits market consumer behavior.

A: Lawson and Leanne talk about tequila pricing trends, consumer behavior influenced by inflation, and small size trends.

Q: Peter Grom asks about distributor inventories and underlying growth.

A: Leanne discusses inventory levels and expectations for normalized levels, and underlying growth trends.

Q: Filippo Falorni asks about inventory impact on fiscal 2026 and tariffs on EU.

A: Leanne and Lawson talk about inventory stability and tariff uncertainties, including reciprocal tariff hopes.

Q: Drew Levine asks about tariffs on Canada and holiday performance.

A: Lawson and Leanne discuss Canada's removal of products and holiday season performance in line with expectations.

Q: Eric Serotta asks about California distributor transition, finished goods inventories, and emerging markets growth.

A: Leanne talks about seamless transition, finished goods inventory adjustments, and emerging markets growth drivers.

Q: Bonnie Herzog asks about marketing and advertising spend strategy.

A: Leanne and Lawson discuss brand spend alignment with growth and incremental investments for brand growth.