Brown-Forman cut net sales forecast for 2024 on Wednesday as cost-conscious consumers looked at cheaper alternatives to the whiskey-maker's more pricier brands in the United States, dragging the company's shares down 7% in premarket trade.
Rising prices of raw materials such as wood and grains have forced most of the alcoholic beverage sector, including the Jack Daniel's whiskey maker, to bump up product prices in previous years.
However, inflation-hit consumers have been deal-hunting and shifting away from pricier non-essentials to stretch their household budgets.
Organic Net Sales
The company, which also makes El Jimador tequilas, now expects annual organic net sales to grow between 3% to 5%, compared with a rise of 5% to 7% expected earlier.
In the second quarter, depletions, which is stock sold to wholesalers or retailers, fell across its portfolio of spirits, with an overall decline of 2% year-over-year.
Higher costs of agave, a crucial raw material for tequilas, wood, and glass, have put sustained pressure on margins for the whiskey maker, offsetting gains made from a letup in supply chain costs.
Lower Forecast
The company also lowered its forecast for organic operating income growth to 4% to 6% from its earlier growth target of between 6% and 8%.
Net sales for the quarter ended Oct 31 rose 1% to $1.11 billion (€1.03 billion), missing analysts' average estimate of $1.15 billion (€1.06 billion), as per LSEG data.
Excluding items, the company earned 50 cents per share, compared with estimates of a profit of 51 cents per share.
Sluggish Demand
In September, Jack Daniel's maker Brown-Forman missed quarterly profit expectations, hurt by higher input costs and sluggish demand for its pricier whiskeys like Woodford Reserve and Gentleman Jack in the US.
Shares of the company were down as much as 6%, touching a two-month low, as its net sales in the first quarter also fell marginally short of analysts' expectations.
Higher input costs, including for agave, grains and wood, took a toll on the spirits maker, even as shipment volumes declined in the United States after wholesalers worked to trim inventories.
Article by Reuters, additional reporting by Hospitality Ireland.
