LOUISVILLE, Ky. (AP) - A surging dollar is causing a hangover for spirits maker Brown-Forman Corp., which reported lower second-quarter net income despite strong sales for its flagship Jack Daniel's Tennessee Whiskey brand.
Overseas sales are key contributors to Brown-Forman's overall earnings, and currency exchange headaches caused the company to fall short of Wall Street's expectations for the recent three-month period.
Its shares slipped in midday trading Wednesday.
Underlying net sales for the entire Jack Daniel's lineup grew by 7 percent in the first half of the company's fiscal year. The brand's flavored line extensions - Jack Daniel's Tennessee Honey and cinnamon-flavored Jack Daniel's Tennessee Fire - led the growth.
Foreign markets account for almost 60 percent of overall revenues for Louisville, Kentucky-based Brown-Forman, and the strong dollar watered down the company's performance for the three-month period ending Oct. 31. A strong dollar makes U.S. goods less competitive.
Brown-Forman CEO Paul Varga said "adverse foreign currency exchange continued to dampen our reported results." But the company's underlying results in the past six months remain strong, he said, and kept it on track to achieve its full-year growth outlook.
Other challenges include an economic slowdown in some emerging markets overseas and intense competition within the liquor industry, he said.
"There is nothing easy about the current business environment," Varga said in a conference call with industry analysts.
For the second quarter, the company reported net income of $200 million, or 97 cents per share. That's down 3 percent from a year ago, when net income was $208 million. The average estimate of seven analysts surveyed by Zacks Investment Research was for earnings of $1 per share.
Quarterly net sales fell 4 percent to nearly $1.1 billion.
Brown-Forman said it expects full-year earnings in the range of $3.40 to $3.60 per share. The company said it anticipates an additional 5-cents-per-share negative impact from adverse foreign currency exchange, at current spot rates, compared to prior full-year forecasts.
Brown-Forman is in the midst of its crucial holiday sales season. An early review of November sales were "quite positive and serves to further strengthen our confidence in our underlying growth outlook," Varga said. Those November results were not part of the first-half results.
The company, meanwhile, reported mixed results for its extensive liquor lineup.
Underlying net sales for Finlandia vodka products declined by 2 percent in the first half of the fiscal year. The drop was blamed mostly on weak consumer demand and a highly competitive trading environment in Poland, a key market.
Brown-Forman said net sales for the Southern Comfort brand dropped by 7 percent during the same period, caused by weak sales at bars and restaurants and competition from new flavored whiskies. The Canadian Mist brand had an 8 percent drop in net sales.
Among other leading brands, underlying net sales grew by 8 percent for the el Jimador tequila lineup amid stronger demand in the U.S., especially at bars and restaurants. Sales for Herradura grew by 7 percent on the same underlying basis.
The company's lineup of super-and ultra-premium whiskey brands - which fetch higher prices - collectively had double-digit growth in underlying net sales. The Woodford Reserve bourbon brand had net sales growth of 28 percent. The Old Forester bourbon brand also had double-digit sales growth.
Brown-Forman shares slipped 54 cents to $103.35 in midday trading Wednesday. Its shares have climbed 18 percent since the beginning of the year, while the Standard & Poor's 500 index has risen 2 percent. The stock has climbed almost 9 percent in the last 12 months.
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Elements of this story were generated by Automated Insights (http://automatedinsights.com/ap) using data from Zacks Investment Research. Access a Zacks stock report on BF.B at http://www.zacks.com/ap/BF.B