COMMENT: Brown-Forman strips costs, FY better than feared
Destocking, the cost of cutting jobs and currency rates have taken their toll on Brown-Forman in its fourth quarter, but the group has held operating margin steady by stringent cost control.
Net sales fell by 12% and profits by 19% for the three months to the end of April, dragging the owner of Jack Daniel's whiskey to declines of 3% and 1% respectively for its fiscal full-year, the group annunced today (10 June).
However, full-year earnings per share of $2.87 was at the top of the group's guidance range, albeit reduced by $0.2 earlier this year to a top end figure of $2.9. The performance beat consensus among analysts, according to a survey conducted by Reuters.
Brown-Forman's share price rose by 3.5% to $46.8 at the start of trading on the New York stock exchange today.
Vigorous cost cutting by Brown-Forman helped it to maintain operating profit margin at around 21% for the year, level with the previous 12 months, although operating profits fell by 4% on a reported basis.
The group's own break-down shows that advertising costs fell by 12% in the fourth quarter and by 8% over the year.
Part of this can be atributed to lower media rates in the US and other key markets, such as the UK, during the global economic downturn, but B-F said that it has also prioritised spending "on those brands, markets, and channels where it believed the consumer and trade were most responsive to the investments".
Performance-related bonuses for staff have also been stripped back during the year, B-F said.
CEO Paul Varge set a range of $2.6 to $3 for fiscal 2010 earnings per share, adding that the firm is aiming for "modest growth" in underlying operating profits.
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