Brown-Forman, known for brands such as Jack Daniel’s and Woodford Reserve, saw US net sales rise 8% thanks in large part to a strong debut from new products such as Jack Daniel’s Tennessee Fire.
Reported operating income was also up 3% for the quarter to $227m.
However, overall net sales for the quarter were down 2% to $900m from $921m in the same period last year.
The previous quarter, the company reported a net sales increase of 6% to $947m and an operating income increase of 23% to $232m. For the entire fiscal year 2015, the company enjoyed a 4% increase in net sales to $4.1bn.
Paul Varga, Brown-Forman CEO, spoke positively of the first quarter of fiscal year 2016’s results, saying the company saw growth in underlying sales and operating income.
Underlying sales, according to Investopedia, is not the required accounting profit that is mandatory to report per rules and regulations. It is a number companies “believe to be an accurate reading of the company’s profit position and may exclude one-time charges or infrequent events.”
Trouble overseas
Net sales growth was down nine percentage points because of foreign exchange, the company said during its quarterly earnings call.
Emerging markets saw a 9% reported net sales loss, with developed markets outside of the US, such as in the UK, experiencing an 8% drop.
While reporting double digit gains in underlying sales from markets such as Brazil, Mexico, Africa and Poland, Brown-Forman reported a 9% loss in net sales for Q1. Russia was especially rough terrain for the company, as there was a double-digit decline in sales due to money devaluation, a weak economy and poor consumer demand.
It was also a tough time in countries like the UK, Germany and France, as the company reported a net sales loss of 8%.
The global travel retail market had an especially rough quarter, dropping 36% in net sales, with Europe’s travel retail channels and American duty free shops seeing volume declines.
This difficult quarter overseas meant “significant uncertainty” for the global economy, the company said.
Jane Morreau, executive vice president and chief financial officer of Brown-Forman, said there was a large appreciation of the US dollar last fall and the company expects another quarter of “significant headwind” to reported revenue.
US stronghold
New product development as well as a better price mix saw the US rise 8% in net sales for Q1 of 2016, Brown-Forman reported.
Jack Daniel’s Tennessee Fire is now distributed across the country and seeing success in acceptance, as well as continued success of other Jack Daniel’s whiskies, the Woodford Reserve brand and Old Forester.
The US accounted for 43% of Brown-Forman’s sales in fiscal year 2015. The company is holding steady that its strong foothold in the US will help it see a 6% to 7% growth in underlying sales for fiscal year 2016.
Varga hopes the company can continue to grow both inside and outside of the US by leaning more heavily on its newer flavored whiskey brands.
“When you leave the United States, Tennessee Honey has played a very prominent role if not the lead role in developing the flavored whiskey category outside the United States,” Varga said. “And so we think that is why we continue to test and read it very closely so that we can expand the world that is possible for flavored whiskey from just over 300 million people to perhaps 7 billion people.”