Jack Daniel's maker warns US-EU trade conflict will hurt bottom line

The maker of Jack Daniel’s whiskey slashed its earnings guidance on Wednesday, warning that retaliatory tariffs from the European Union amid an ongoing trade dispute could hurt its business in the near term.

Brown-Forman Corp., which also owns the Finlandia vodka brand, said it now expects net income of $1.65 to $1.75 per share in fiscal 2018, down from a previous estimate of $1.75 to $1.85 per share. The downgrade represents a loss of $50 million in expected profits.

Brown-Forman plans to raise prices in key segments of the European market, including the United Kingdom and Germany, though it has not done so yet. Company officials said the decision to delay the price increases would impact its profitability and noted that the increases were unlikely to cover the full cost of the tariffs.

"We intend to take price increases in many of the remaining markets as a result of tariffs, and we are continuing to assess the timing and amount on a market-by-market basis, while considering the impact on our business and our consumers," CFO Jane Morreau said on an earnings call. "However, at this point, we do not expect that these price increases will offset the cost of the tariff itself in the interim."

The company has already raised prices on its products in some markets to offset the European Union’s 25 percent tariff on American whiskey products – a retaliatory measure after President Trump enacted tariffs on steel and aluminum imports from the region. The European Union accounts for roughly a quarter of the company’s total sales.

The warning came even as Brown-Forman posted a 6 percent increase in sales to $766 million for the quarter, owing in part to its stockpiling of inventory in Europe ahead of the tariffs. The company affirmed that it expects sales growth of 6 percent to 7 percent for the full year.