Brown-Forman Corporation Q1 FY2026 earnings call

• Geographic Performance: Highlighted growth in emerging markets like Mexico and Brazil, challenges in developed markets and U.S., and distributor transitions in the U.S.
• Strategic Innovation: Launch of Jack Daniel's Tennessee Blackberry in U.S. with strong consumer appeal and plans to globalize the flavor.
• Workforce and Structure: Streamlined workforce structure for increased agility, distributor transitions in U.S. with increased dedication and updated terms.
• Financials: Gross margin expanded 40 basis points, operating expenses managed, organic operating income increased 2%.

Overall, reported net sales declined 3%, but organic net sales increased 1% after adjusting for A&D impact and foreign exchange. Geographically, emerging international markets led organic net sales growth (25% in Travel Retail, 7% overall), while developed international markets declined 9% and the U.S. declined 2%. Key markets: Mexico had organic net sales up 22% with market share gains in RTD and Whiskey; Brazil saw 30% organic net sales growth from Jack Daniel's family brands; Germany organic net sales down 13%, U.K. down 16% but Jack Daniel's gained share; U.S. organic net sales down 2% due to Jack Daniel's Tennessee Blackberry launch and distributor transitions; used barrels organic net sales down over 40%; Canada organic net sales down nearly 60% due to U.S. product ban.

Reaffirmed full year 2026 outlook. Expect low single-digit decline in organic net sales, gross margin expansion due to price/mix offsetting costs, organic operating income decline in low single-digit range, effective tax rate 21%-23%, capital expenditures $125M-$135M. Anticipate shipments and depletions to normalize, with second half aligning with full year guidance.

• Geopolitical and Macro: Consumer uncertainty, tariff impacts, and trade disputes (e.g., U.S.-Canada).
• Industry Conditions: Normalization of used barrel sales, inflation impact on input costs, and competitive environment.
• Consumer Behavior: Uncertainty around health and wellness trends, GLP-1s, and cannabis impact on spirits consumption.

Q: Peter Grom on distributor inventory impact A: Leanne Cunningham said shipments and depletions expected to be in line for full year, with first half aligning with guidance.

Q: Nadine Sarwat on U.S. underlying growth A: Lawson Whiting discussed cyclical vs. structural factors, noting consumer buying power and tariff uncertainty as cyclical, with some moderation in GLP-1 and cannabis impacts.

Q: Andrea Teixeira on Jack Daniel's consumer takeaway A: Lawson Whiting mentioned gaining on TDS, positive trends in premiumization, and initiatives like on-premise focus and new distributors.

Q: Andrea Pistacchi on Jack Daniel's Tennessee Blackberry launch A: Leanne Cunningham said strong start with distributor excitement, and potential for global expansion.

Q: Filippo Falorni on gross margin A: Leanne Cunningham said full year gross margin expansion expected, benefiting from absence of TSAs and Korbel, offset by input costs and lower production.

Q: Eric Serotta on competitive and promotional environment A: Lawson Whiting discussed rational pricing, shelf space dynamics, and allocated bourbon products.

Q: Kevin Grundy on growth in emerging markets A: Lawson Whiting emphasized focus on emerging markets like Brazil, Turkey, UAE, and Asia, while maintaining focus on U.S.

Q: Bonnie Herzog on shipments and price/mix A: Leanne Cunningham referred to Schedule D for shipment impact and price/mix drivers including New Mix and used barrel sales.