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Brown-Forman shares drop 7% after Q2 earnings miss

Brown-Forman (NYSE:BF.B) is trading around -7% on Wednesday after posting a lower-than-expected Q2 bottom line.

The spirits company's EPS was lower than the Wall Street consensus by $0.08, but revenue rose nearly 10% Y/Y to $1.09B, beating expectations.

Earnings were hurt by narrower margins, driven by the impact of inflation on input costs, costs related to supply chain disruptions, and negative foreign exchange effects.

For the first half of the fiscal year, Brown-Forman reported net sales growth across all geographies and strong demand in the travel retail sector, helped by continued rebuilding of distributor inventories.

The Jack Daniel’s family of brands was the top performer, with net sales growth of 9% in H1 driven by higher prices and an increase in distributor inventories. Premium bourbons were also up 39% thanks to by higher volumes in the US.

Brown-Forman (BF.B) estimates stronger growth in the fiscal year despite global macroeconomic and geopolitical uncertainties, helped by improving consumer demand and easing supply chain constraints.

After a gross margin decline in the first half, the company expects margins in H2 to hold on at the same level, closing the year with high-single digit organic operating income growth.