Worldwide demand for its Jack Daniel's whiskey helped U.S. distiller Brown-Forman Corp (BFb.N) to beat Wall Street profit estimates for a third consecutive quarter, and the company said full-year sales would rise.
Cash-strapped Americans are less likely to cut spending on liquor than on groceries, an Ipsos poll for Reuters this month showed. Brown-Forman also reported a surge in sales of whiskey to Russia and other emerging markets over the last nine months.
The Louisville, Kentucky-based company said sales of its flagship Jack Daniel's whiskeys and liqueurs rose 10 percent in the nine months to January 31. Sales of the Jack Daniel's Tennessee Honey Liqueur brand alone nearly doubled.
"These rates of growth will continue into the fourth quarter, keeping us on track to deliver high single-digit underlying net sales growth," Chief Financial Officer Donald Berg said on a post-earnings conference call.
Brown-Forman reported an 18 percent increase in its net profit in the third quarter to January 31. Sales rose 7 percent to $1.03 billion in the period, the company said in a statement.
In the first nine months of the company's fiscal year, underlying net sales rose 8 percent, driven by premium brands and strong global demand for its North American whiskeys.
Combined, net sales to Turkey and Russia increased by more than 35 percent in the nine months, the company said. It also recorded double-digit percentage growth in sales to Brazil, Mexico, India, Thailand and Indonesia.
Berg said the company's whiskey business, which includes the Gentleman Jack and Old Forester brands, accounts for almost 60 percent of the cases sold by Brown-Forman around the world.
Brown-Forman said it gained share in its home market, the United States, due to higher prices and strong demand for its whiskeys and its Jack Daniel's Tennessee Honey Liqueur.
Two-thirds of Americans are spending less as they cope with higher taxes and gasoline prices, the Ipsos poll found. But while 62 percent of respondents said they would cut back on clothing and shoes, and 46 percent would buy fewer groceries, only 39 percent said they would seek to cut their liquor budget.
Brown-Forman, founded by George Garvin Brown in 1870, raised prices on its alcoholic beverages last year to compensate for a spike in the price of corn, which is used to make whiskey. But this did not deter consumers, the company said.
The company said its gross margin in the third quarter rose to 49.4 percent from 47.7 percent a year earlier.
However, fourth-quarter gross margins were likely to be affected by investments in marketing and selling, general and administrative expenses in Europe and Asia, Berg said.
To expand geographically, the company last year struck a deal with Japanese brewer Asahi Group Holdings Ltd (2502.T) to distribute its brands in Japan.
Brown-Forman, which also makes Finlandia vodka and Southern Comfort liqueur, narrowed its full-year profit forecast to $2.60 to $2.68 per share, from $2.58 to $2.70 per share earlier.
Analysts on average were looking for earnings of $2.69 per share for the full year, according to Thomson Reuters I/B/E/S.
Net income rose to $157.6 million, or 73 cents per share, in the quarter ended January 31 from $133.1 million, or 62 cents per share, a year earlier.
Analysts on average expected third-quarter earnings of 70 cents per share.
Brown-Forman's shares were down marginally at $67.67 on the New York Stock Exchange on Wednesday.
(Additional reporting by Maria Ajit Thomas in Bangalore; Editing by Joyjeet Das and Robin Paxton)