Brown-Forman reported a solid Q2 2025, with revenue of $1.095 billion in the quarter and $2.046 billion in the first half of fiscal 2025. The period showcased a mixed performance: strong growth in premium and ultra-premium brands (Woodford Reserve, Old Forester, Jack Daniel's RTDs, Diplomatico, and Gin Mare via a broad international footprint) supported overall operating leverage, while tequila brands El Jimador and Herradura faced meaningful headwinds in the U.S. and Mexico amid intensified competition and macro softness. Management guided for a return to growth in organic net sales and operating income in fiscal 2025, projecting 2-4% annual organic net sales growth driven by international markets, price/mix benefits, and the full-year contribution from Gin Mare and Diplomatico, offset by higher input costs and some lingering inventory normalization effects.
Key highlights for the quarter include: (1) a 3Q2 2025–start to sequential improvement in U.S. demand commentary tempered by tequila mix-shift and competitive dynamics; (2) a continued strategic pivot to premium portfolios (Gin Mare, Diplomatico, Jack Daniel's RTDs) and geographic expansion (Japan, Turkiye, Brazil) with emerging markets delivering mid-teens double-digit momentum in several brands; (3) a disciplined approach to capital allocation, including a 4% dividend increase (41st consecutive year of increases) and the planned divestitures of Finlandia and Sonoma-Cutrer transitioning services ending, coupled with a Duckhorn equity share realization (cash proceeds of $350 million on completion of the Duckhorn Portfolio merger).
Overall, BF-B demonstrates earnings resilience with an EPS of $0.55 in Q2 and $0.96 for the first half of fiscal 2025, albeit with gross margin contraction (~240 basis points) and higher operating costs in the near term. The near-term risk factors include tariff tailwinds/uncertainties, higher agave input costs offset by lower prices in some tequila segments, and a slower consumer environment in key markets like the U.S. and Mexico. The investment thesis remains anchored in portfolio breadth, geographic diversification, premiumization, and expected inventory normalization into the second half of 2025.