BF.B Brown Forman Corp

By Tripp Mickle 

Brown-Forman Corp. warned Wednesday that struggles in emerging markets will hurt future results and said it would try to offset that by shifting advertising and promotional support from areas like Asia and Russia to more stable ones like the U.S. and Europe.

The maker of Jack Daniel's Tennessee Whiskey is struggling in those markets where softening economies have made it tougher for consumers to buy its higher-priced American whiskeys. Sales in those emerging markets declined 11% during the quarter ended Jan. 31, lowering the company's net sales 1% from a year earlier to $1.08 billion and leading it to cut its earnings outlook for the year.

The Louisville, Ky., company now expects net sales growth of 5% for the fiscal year ending April 30, excluding foreign exchange and trade inventory adjustments. That is down from earlier expectations for 6%-to-7% sales growth. It lowered per-share earnings expectations to between $3.32 and $3.42 from $3.40 to $3.60.

Chief Executive Paul Varga said the company remains committed to emerging markets in the long term but plans to intensify efforts to increase American whiskey sales in more stable economies.

"This does not imply some radical reallocation of resources or exiting of investment positions in emerging markets," Mr. Varga said. "It's more of a subtle shift in the expectations we will have for where we are likely to derive our growth in the short term."

The company will shift advertising and promotional spending from emerging markets to developed markets, supporting priorities such as its expansion of Jack Daniel's Tennessee Fire in the U.K. and Australia and Herradura tequila in the U.S.

Weakness in emerging markets during the quarter was countered by 6% sales growth in the U.S., which accounts for about 40% of the company's business. Strong U.S. sales of Jack Daniel's and Tennessee Honey has helped the company deliver global sales growth for the three quarters ended Jan. 31 of 4% and 11%, respectively, excluding foreign exchange and trade inventory adjustments.

Overall, Brown-Forman reported a quarterly profit of $190 million, up 2% from $186 million a year earlier. The company said its results were pressured by weaker foreign currencies, particularly the British pound. Its lower forecast for the year reflects a 6-cent impact from foreign currencies.

Mr. Varga said the results were "pretty solid," considering the emerging-market struggles, this year's stock-market tumult, and the Paris attacks in November, which briefly dampened restaurant and bar sales in Europe.

The company expects to benefit in the coming quarters from its recent sale of Southern Comfort and Tuaca to Sazarac Co. for $542 million. Mr. Varga said shedding Southern Comfort would help sales staff focus more narrowly on Jack Daniel's. The Southern Comfort sale will support a $1 billion share repurchase program Brown-Forman announced in January. "This ends up being a multidimensional benefit for us," Mr. Varga said.

Lisa Beilfuss contributed to this article.

Write to Tripp Mickle at Tripp.Mickle@wsj.com

(END) Dow Jones Newswires

March 02, 2016 17:10 ET (22:10 GMT)

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