LOUISVILLE, KY – Brown-Forman Corporation, known for its Jack Daniel’s whiskey, revised its net sales forecast for 2024 downward on Wednesday. The adjustment comes as consumers increasingly opt for less expensive alternatives in the U.S. market, leading to a 7% decline in the company’s shares in premarket trading.
The alcoholic beverage sector, including Brown-Forman, has been grappling with rising costs of raw materials like wood and grains. These pressures have led to increased product prices in recent years.
Amid inflation, consumers have been seeking deals and shifting away from higher-priced non-essentials, affecting household budgets. Consequently, Brown-Forman, which also produces El Jimador tequilas, has adjusted its expectations for annual organic net sales growth to 3-5%, a decrease from the previously anticipated 5-7% rise.
The company experienced a 2% year-over-year decline in depletions, which measure stock sold to wholesalers or retailers, across its spirits portfolio in the second quarter.
Challenges have also emerged from higher costs for agave, wood, and glass, key components in the company’s production. These expenses have continued to strain margins despite some relief in supply chain costs.
Furthermore, Brown-Forman lowered its forecast for organic operating income growth to 4-6%, down from the initial projection of 6-8%.
The company’s net sales for the quarter ending October 31 increased marginally by 1% to $1.11 billion. However, this figure fell short of the $1.15 billion average estimate by analysts, according to LSEG data.
Brown-Forman reported an earnings of 50 cents per share, excluding specific items, slightly below the expected profit of 51 cents per share.