On Friday, Bernstein, a financial firm, adjusted its outlook on Brown Forman (NYSE:BFb) shares, reducing the price target to $66 from the previous $69, while still maintaining an Outperform rating. The adjustment came in response to the company's fourth-quarter fiscal year 2024 results, which were notably impacted by inventory issues.
According to Bernstein, Brown Forman encountered a significant headwind in its Q4 F24 topline due to inventories. Distributors reducing their existing stock created a 9 percentage point drag on sales. The effect varied by region, with the U.S. facing approximately a 10 percentage point challenge, Developed International around 6 percentage points, and Emerging Markets experiencing a substantial 15 percentage points headwind. Travel Retail, however, saw a slight 1 percentage point benefit.
The management of Brown Forman identified two main factors contributing to the need for distributors to adjust their inventory levels: a sustained dip in end-consumer demand and the impact of higher interest rates. These conditions have led distributors to hold inventory at the lower end or just below their typical range.
The report from Bernstein highlights the inventory challenges as the primary concern reflected in Brown Forman's latest financial results. While the company maintains an Outperform rating, the revised price target suggests caution due to the current inventory management dynamics within the company's distribution channels.
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