FILE - In this Dec. 5, 2011, file photo, bottles of Jack Daniel's Tennessee Whiskey line the shelves of a liquor outlet in Montpelier, Vt. The company that makes Jack Daniels took a hit from the Trump administration’s tariff fight, estimating that the standoff dragged sales growth down by a percentage point for the entire year. Brown-Forman Corp. (BF.A) on Wednesday, June 5, 2019, reported fiscal fourth-quarter net income of $159 million. (AP Photo/Toby Talbot, File)

Trade war comes to Louisville, Jack Daniels takes tariff hit

June 05, 2019 - 9:11 am

LOUISVILLE, Ky. (AP) — Led by strong sales for its whiskey and tequila brands, Brown-Forman Corp. reported higher fourth-quarter net income Wednesday despite taking a hit from the Trump administration's tariff fight.

The Louisville, Kentucky-based company — best known for its Jack Daniel's Tennessee Whiskey brand — said tariff-related lower net prices to distributors in some markets shed 1 percentage from its net sales growth.

But the company showed its resilience to the trade disputes by posting robust sales growth in emerging global markets. It also had sales growth in the United States.

American whiskey producers face stiff retaliatory tariffs in the European Union, the industry's biggest export market, as part of the Trump administration's trade disputes. It's a headache that's continuing into the company's new fiscal year.

"Although tariffs and higher input costs will negatively impact our gross margins again this year, we believe we are on track to return to high single-digit operating income growth as we move beyond fiscal 2020," said Lawson Whiting, the company's president and CEO. "Our growth prospects remain bright as we develop our premium spirits portfolio around the world."

Foreign markets account for slightly more than half of Brown-Forman's overall sales.

For the full fiscal year, underlying net sales in emerging markets grew 11%, compared to 13% a year ago, the company said. Mexico was a big growth driver, with underlying net sales up 11%, fueled by strong demand for its tequila brands. Those net sales surged by 25% in Brazil due to strong demand for Jack Daniel's Tennessee Whiskey.

Underlying net sales in the U.S. grew 3%.

Those net sales increased by 4% in the company's developed international markets, though the growth was suppressed by more than 1 point due to tariffs, it said.

Brown-Forman, like other large spirits companies, stockpiled inventories in bracing for the effects of tariffs imposed in the EU that targeted American whiskey and other U.S. products in response to Trump's decision to impose tariffs on European steel and aluminum.

Brown-Forman reported net income of $159 million, or 33 cents per share, for the quarter ended April 30, which topped expectations by 3 cents. That's compared to $110 million, or 23 cents per share, a year ago.

Fourth-quarter net sales were up 1% at $744 million, which was short of the $762 million that Wall Street had expected, according to a survey by FactSet.

For the full fiscal year, net income rose by 17% to $835 million, or $1.73 per share, and revenue was at $3.32 billion.

Among its brands, the entire Jack Daniel's lineup had underlying net sales growth of 4% for the full fiscal year, the company said. It reported 22% underlying net sales growth for Woodford Reserve. Among its tequilas, Herradura and el Jimador both rose 13%.

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Portions of this story were generated by Automated Insights (http://automatedinsights.com/ap) using data from Zacks Investment Research. Access a Zacks stock report on BF.A at https://www.zacks.com/ap/BF.A

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