Alcoholic beverage manufacturer Brown-Forman Corp. (BF-A, BF-B) Wednesday reported a decline in third-quarter profit, as expenses escalated, despite a rise in sales. Looking ahead, the company narrowed its full-year 2010 earnings forecast.
The Louisville, Kentucky-based company's third-quarter net income declined to $107.9 million or $0.73 per share from $123.4 million or $0.81 per share in the corresponding period last year.
During the third quarter, Brown-Forman recorded a non-cash trademark impairment charge of $11.6 million, or $0.07 per share on Don Eduardo, a low-volume, high-priced tequila.
On average, six analysts polled by Thomson Reuters expected the company to earn $0.70 per share for the quarter. Analysts' estimates typically exclude special items.
The economic crisis, which restricted restaurant visits, had hurt the company's top line in the past few quarters. In order to tackle the slump, the liquor company embarked on a cost-cutting program on May 1, 2009, the beginning of its fiscal 2010. The program included elimination of 250 positions, early retirement to certain U.S. employees, eliminating merit increases for all employees, and cutting back on discretionary spending, including travel and meetings.
The company, with brands such as Jack Daniel's Tennessee Whiskey, Southern Comfort and Finlandia Vodka, said today that its third-quarter net sales improved to $861.7 million from $784.1 million in the previous year. Underlying net sales grew 2% in the third quarter. Analysts expected revenues for the quarter to be $817.02 million.
Gross profit advanced to $410.9 million from $370.6 million and gross margin improved to 47.7% from 47.3%.
Operating income declined to $173.9 million from last year's $177.2 million. Operating margin was 20.2% in the just concluded quarter, compared to 22.6% last year.
Third-quarter cost of sales increased to $226.5 million from $221.8 million in the previous year. Selling, general, and administrative expenses increased to $131.5 million from $113.1 million in the prior year in which the company adjusted performance-related incentive expenses due to the downturn in the business. Effective tax rate increased to 35.3% from 27%.
For the second quarter ended October 31, 2009, the company's net income advanced to $147.3 million or $0.99 per share from $143.2 million or $0.94 per share in the same period last year, on lower costs and expenses. The spirits company reported quarterly net sales of $892.9 million, down 4% from last year.
In the first three quarters of the fiscal, net income grew to $376.5 million or $2.53 per share from $354.8 million or $2.34 per share in the prior year. For the nine-month-period, net sales slipped to $2.493 billion from last year's $2.509 billion. The company reported strong underlying net sales gains for its ready-to-drink brands, as well as growth for Gentleman Jack, Jack Daniel's, and el Jimador, although partially offset by underlying net sales declines of Southern Comfort, Finlandia, and some agency brands.
Looking ahead, the company narrowed its fiscal 2010 full-year earnings outlook to $2.98 to $3.08 per share from the prior range of $2.95-$3.15 per share. Analysts expect 2010 earnings in the range of $3.04-$3.10 per share.
The revised outlook includes the $0.07 per share non-cash trademark impairment charge recorded in the third quarter. The guidance assumes expectations of continued underlying net sales trends, current foreign exchange spot rates, projected costs associated with route-to-consumer enhancements, higher effective tax rate, incremental underlying investments in advertising as well as selling, general, and administrative expenses.
''We remain concerned about the impact on consumption trends from a soft on-premise channel, consumer trading-down, and heightened competitive activity,'' the company noted.
Wine and spirits maker Constellation Brands, Inc. (STZ, STZ-B) is slated to report fourth-quarter results on April 5. Analysts expect the company to earn $0.25 per share on revenues of $729.57 million.
BF-A closed Tuesday's regular trade at $58.28, down $0.05 or 0.08%, on 6,788 shares. For the past year, the stock traded in the range of $35.06-$58.50.
BF-B settled $0.42 or 0.76% higher at $55.89 on 447,330 shares. In the past 52 weeks, the shares moved between $34.97 and $56.06.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.