Brown-Forman Corporation Class B (NYSE:BF.B) stock fell 1.47% (As on Sep 2, 11:57:40 AM UTC-4, Source: Google Finance) though the company in the first quarter of FY 22 has reported 20% rise in the net sales. The company had strong double-digit underlying top line growth, reflecting an increase in distributor inventory levels in the United States, partially offset by the sale of Early Times, Canadian Mist and Collingwood brands during the first quarter of fiscal 2021. In the first quarter, operating income declined 25% to $289 million (+15% on an underlying basis) and diluted earnings per share declined 41% to $0.40 due to the gain from the sale of the Canadian Mist, Early Times, and Collingwood brands in the prior year.
The company has delivered broad-based growth across geographies. The U.S. delivered another strong quarter with 16% underlying net sales growth. The developed international markets also increased underlying net sales in the double digits and the reopening of the on-premise channel as well as a rebound in tourism were substantial contributors to growth. In aggregate, the company has also experienced strong growth in the emerging international markets as well as travel retail as the company cycle the effect of easy comparisons and more markets return to growth and recover from the pandemic.
Moreover, in the first quarter, Jack Daniel’s family of brands net sales grew 20% (+16% underlying), Premium bourbons grew net sales 34% (+36% underlying) and the tequila portfolio grew net sales 32% (+23% underlying). Jack Daniel’s family of brands net sales growth was driven by Jack Daniel’s Tennessee Whiskey which benefited from higher volumes globally and favorable channel mix in the United States related to the on-premise reopening. Premium bourbons, led by Woodford Reserve and Old Forester, maintained double-digit net sales growth driven by strong volumetric gains in the United States. The tequila portfolio was led by double-digit net sales growth for Herradura and el Jimador. In particular, Herradura benefited from resurgent demand in Mexico following disruption in the prior-year period. These gains were partially offset by lower volumes of New Mix in Mexico reflecting a difficult comparison to the same prior-year period when volume and shelf space benefited from a temporary supply chain disruption in the beer industry.
Meanwhile, regarding gross margins, currently, the company is managing through the impact of global supply chain disruptions, including glass supply and challenging cost headwinds. The company is experiencing greater-than-expected logistics cost, higher input costs on items such as grain and aluminum, agave costs that are below their peak and stable, though, easing at a slower pace than previously forecasted, due to higher demand within the category. In addition, with the rebound and recovery of the markets and channels, coupled with strong consumer demand for the brands, the company is currently managing through glass supply constraints.