Brown-Forman, the owner of Jack Daniel’s whiskey and Herradura Tequila, today (6 December) lowered its forecasts for annual underlying sales and operating profit.

The US spirits group said its business grew more slowly than it had expected in the first half of its financial year.

As a result, Brown-Forman is forecasting a 3-5% rise in its net sales on an organic basis for the full year. That compares to an estimate issued in August of growth of 5-7%.

The Woodford Reserve owner now sees its organic operating profit rising 4-6%, versus a 6-8% forecast given four months ago.

In the six months to the end of October, Brown-Forman’s net sales increased 2% to $2.1bn, which amounted to a 1% rise organically.

Net sales from whiskey fell 2% and by 1% organically. Brown-Forman said the figures were “compared to strong results” in the first half of the previous financial year.

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By GlobalData

The company reported a 1% fall in net sales from its Jack Daniel’s portfolio, which amounted to a flat performance organically.

Tequila net sales were up 2% but declined 1% on an organic basis. Herradura’s net sales dropped 9% organically due to lower volumes in the US.

The net sales of New Mix, the company’s range of Tequila-based RTDs, grew 22% on an organic basis, helped by improved volumes and higher prices.

First-half operating income was up 1% at $666m and also grew 1% on organic basis.

Net income fell 1% to $473m, Brown-Forman said.

President and CEO Lawson Whiting said the results “illustrate Brown‑Forman’s ability to deliver continued growth, even amid dynamic market conditions and very strong comparisons from the prior-year period”.

He added: “While we grew at a slower pace than anticipated, we delivered strong gross margin expansion and continued to invest strongly behind our brands. We continue to believe our premium portfolio and broad geographic footprint will position us for accelerated growth in the second half of the fiscal year.”

In a note to clients, Barclays analyst Lauren Lieberman set out the pressure on sales the El Jimador owner had seen in the second quarter. “Interestingly, the revenue shortfall this quarter didn’t stem from the US market as was largely expected but rather large markets in Europe – UK and France – were down dramatically, along with a meaningful deceleration in Mexico.”

Lieberman added a rise in second-quarter gross margins meant Brown-Forman’s results for that three-month period indicated “both the bull case and the bear case proved correct, with the former focusing on gross margin recovery and the latter on the outlook for top-line growth”.

Shares in Brown-Forman were down 11.85% at $53.33 at 15:36 GMT.