Brown Forman (NYSE:BF.A) said it finished fiscal 2026 ahead of its organic expectations, despite continued pressure from weaker discretionary spending in the U.S. and developed international markets, lower used barrel sales and the ongoing absence of American spirits from many Canadian shelves.
President and Chief Executive Officer Lawson Whiting said the company “delivered a strong finish to fiscal 2026,” with full-year organic net sales and organic operating income above the company’s expectations. He said the performance reflected growth in emerging international markets, momentum in travel retail and continued contributions from new products, particularly Jack Daniel’s Tennessee Blackberry.
Emerging Markets and Travel Retail Offset Developed-Market Weakness
Whiting said emerging international markets delivered 12% organic net sales growth, led by strong double-digit performance from New Mix in Mexico. He described New Mix as Mexico’s original tequila ready-to-drink brand and said it continued gaining market share in the country’s fast-growing RTD category.
The travel retail channel posted 5% organic net sales growth, driven by Jack Daniel’s Tennessee Whiskey and supported by higher traveler volumes and new launches including Jack Daniel’s Tennessee Blackberry and Jack Daniel’s Heritage Barrel.
Developed international markets declined 3% organically. Canada was the largest drag, with organic net sales down nearly 60% as American-made products remained off shelves in most Canadian provinces. Whiting also cited weak spirits trends in Germany and the U.K., where Brown-Forman’s organic net sales fell 7% and 9%, respectively.
Still, Whiting said the company is maintaining or gaining whiskey share in six of its top eight European markets. He also highlighted Italy and Japan as markets benefiting from Brown-Forman’s expanded owned-distribution model. In Italy, organic net sales doubled in fiscal 2026, helped by pricing and distribution gains across the portfolio, including Gin Mare and Jack Daniel’s Tennessee Whiskey.
U.S. Sales Flat as Innovation Supports Demand
In the United States, organic net sales were flat in fiscal 2026. Whiting said that result was ahead of depletion-based results and takeaway trends, helped by distributor changes and innovation.
The company named 11 new distributors across 25 U.S. markets during the year as part of what Whiting called a “generational U.S. route to consumer transformation.” In response to an analyst question, Whiting said the transition created some disruption, including lost on-premise listings in some states, but said the company is working to regain those placements.
Jack Daniel’s Tennessee Blackberry remained a central focus of the call. Whiting said the product, launched in August 2025, reached nearly 300,000 nine-liter case depletions by the end of the fiscal year and became the second-largest new product by value in total distilled spirits in Nielsen data. In Europe, the product reached almost 150,000 nine-liter case depletions across six launch markets in fiscal 2026.
Whiting said shipments of Blackberry exceeded depletions, though the gap is narrowing. Chief Financial Officer Jim Peters said the company expects depletions to exceed shipments in fiscal 2027 as that gap closes.
Margins, Impairments and Cash Flow
Peters said reported gross profit increased 2% in fiscal 2026, while reported gross margin expanded 160 basis points to 60.5%. The improvement included a 130-basis-point benefit related largely to the conclusion of the Korbel relationship and the absence of the prior-year Sonoma-Cutrer transition services agreement, along with favorable foreign exchange and lower costs.
Organic advertising expense decreased 5%, reflecting what Peters described as a more targeted and disciplined marketing approach. Organic SG&A increased 7%, driven by costs tied to contemplated business transaction discussions and higher compensation and benefits expenses.
Brown-Forman recorded fourth-quarter non-cash impairment charges of $45 million for the Gin Mare brand name and $87 million for the Diplomático brand name. Peters said the charges reflected lower forecast assumptions due to a softer category outlook and challenging macroeconomic conditions in key markets for the brands. He said Brown-Forman still expects both brands to contribute long-term growth.
Reported operating income declined 10% for the year, while organic operating income fell 2%. Diluted earnings per share declined 17% to $1.53, primarily due to the impairment charges and the absence of the prior-year gain on the sale of the company’s investment in Duckhorn.
Cash provided by operations rose by $402 million to $1 billion, and free cash flow increased by $462 million to $893 million. Peters said the improvement reflected disciplined working capital management and lower capital spending needs after several years of major investments. The company paid $427 million in quarterly dividends and repurchased $400 million of Class A and Class B common stock during the year.
Fiscal 2027 Outlook Calls for Flat Organic Sales
For fiscal 2027, Brown-Forman expects organic net sales to be approximately flat and organic operating income to decline 3% to 5%. Peters said the spirits sector continues to face macroeconomic headwinds and geopolitical uncertainty, which are affecting beverage alcohol consumption, especially in developed markets.
- U.S. and developed international depletion trends are expected to remain similar to fiscal 2026.
- Emerging international markets and travel retail are expected to continue growing.
- American spirits are assumed to remain off shelves across most of Canada for the full fiscal year.
- Used barrel sales are expected to remain pressured, though the year-over-year sales impact should be smaller.
- Capital expenditures are expected to be $60 million to $70 million.
- The effective tax rate is expected to be approximately 20% to 22%.
Peters said higher input costs will pressure results in fiscal 2027, including costs tied to whiskey inventory produced during the inflationary period of the early 2020s, as well as transportation, glass and lower production volumes. He said those barreled whiskey costs are expected to persist for the next couple of years.
Pernod Ricard Discussions End
Whiting and Peters both addressed the termination of discussions with Pernod Ricard, saying Brown-Forman regularly evaluates strategic opportunities but was unable to reach mutually agreeable terms in this case. Peters said the company would not comment further on the topic or on M&A speculation.
Whiting said Brown-Forman’s focus remains on expanding its geographic footprint, building consumer-relevant brands and improving operational efficiency. Peters added that the company’s balance sheet and free cash flow remain central to its capital allocation strategy, which includes investing in the business, paying increasing regular dividends, pursuing strategic opportunities and returning cash to shareholders.
About Brown Forman (NYSE:BF.A)
Brown-Forman Corporation manufactures, bottles, imports, exports, markets, and sells various alcoholic beverages. It provides spirits, wines, whiskey spirits, whiskey-based flavored liqueurs, ready-to-drink and ready-to-pour products, ready-to-drink cocktails, vodkas, tequilas, champagnes, brandy, bourbons, and liqueurs. The company offers its products primarily under the Jack Daniel's, Woodford Reserve, Canadian Mist, GlenDronach, BenRiach, Glenglassaugh, Old Forester, Early Times, Slane Irish Whiskey, Coopers' Craft, el Jimador, Herradura, New Mix, Pepe Lopez, Antiguo, Finlandia, Korbel Champagne, and Sonoma-Cutrer brands.
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