Brown-Forman could bet on US$400m share buyback to restore investor faith
Brown-Forman has unveiled plans to repurchase up to US$400m of its own shares over the next year in what it calls a sign of confidence in its long-term prospects. Analysts, however, are divided over whether the move signals recovery or reflects desperation after a bruising year for the Bourbon maker.
Brown-Forman’s board plans to repurchase up to US$400m worth of the company’s shares over the next year.
While the company itself sees this as a clear vote of confidence that its woes have reached rock bottom, observers have questioned whether it is a desperate gesture to reassure shareholders that the value of their investments will not fall further.
This year has been an annus horribilis for the producer of the Jack Daniels and Woodford Reserve labels.
As demand for Bourbon slumped in the wake of the drift away from Bourbon as a category and consumer resistance to price rises, the company has seen the value of its shares nosedive by a third.
Trade tensions and boycotts bite
It remains the target of angry Canadian state governments and their consumers, who are boycotting drinks produced in America in retaliation against President Trump’s tariff policies and his belief that Canada would be better off as the 51st state. Its sales to Canada, its largest single export market, have more than halved this year.
Further, although the EU has come to a tariff pact with Trump, there remains the possibility that Brussels could target American alcohol in the ongoing uncertainties.
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Falling revenues and restructuring pains
Recently, Brown-Forman announced that in the first quarter of fiscal 2026, its revenues had dropped by a further 3% to US$924m. Worse, its operating income contracted by 7%.
This year, Brown-Forman has fired 12% of its workforce, sold its cooperages and drastically reshaped its US distribution arrangements. That created some wrinkles in its sales, which will unravel over the next two quarters.
Mixed motives behind the buyback
Companies usually initiate share buybacks to improve returns to shareholders, a pattern that has been widespread in the drinks sector over the past couple of years.
Cynics, however, say that share repurchases are evidence of a company not being able to see a way to generate better returns on its capital via investment.
CEO Lawson Whiting said he was pleased with a “solid start” to the year and he has stressed that the buyback allows room for flexibility for continued investment in growth initiatives.
The programme itself is highly flexible in that the company can spend $400m on its shares or not as and when it sees fit within the next year. If it is weakened, however, that will indicate further uncertainty.
Investors await signs of recovery
The message that there is hope at the bottom of the Bourbon barrel will come under close scrutiny in 10 days’ time at an investor conference at which Brown-Forman plans to set out its roadmap to recovery.
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