Profit Fell on Costs to Buy Herradura Tequila

Jack Daniel's Maker Says Profit Fell on Costs to Buy Herradura Tequila

Brown-Forman Corp., the maker of Jack Daniel's Tennessee Whiskey and Finlandia vodka, said profit fell for the first time in six quarters on costs to purchase Mexican tequila brands from Grupo Industrial Herradura SA.

Net income declined to $105.1 million, or 85 cents a share, from $120.5 million, or 98 cents, a year earlier. Sales in the period ended Jan. 31 rose 20 percent to $754.8 million from $627.6 million, the Louisville, Kentucky-based company said today in a statement distributed by Business Wire.
   
Chief Executive Officer Paul Varga paid $776 million in January to buy Herradura's Mexican tequila brands to expand its spirits offerings in the U.S. The company said in the second quarter it faces "softness" in Jack Daniel's demand in markets such as the U.K., China and Spain as consumers cut back on alcohol spending or switched to cheaper brands.

"Herradura is bringing some dilution," Timothy Ramey, an analyst with Lake Oswego, Oregon-based D.A. Davidson & Co., said March 1. "Another thing that's spooking people is the flattish sales in China due to some counterfeiting there." He rates the shares "buy."

Excluding some costs, Brown-Forman said profit would have been 89 cents. Five analysts surveyed by Bloomberg News estimated 83 cents, on average, in a Bloomberg survey, before some items.

Brown-Forman Class B stock rose 50 cents to $64.75 yesterday in New York Stock Exchange composite trading. They lost 4.4 percent last year, the first annual decline in five years.

Source:
MARY JANE CREDEUR
Bloomberg News