Investing.com -- Jefferies warned of further earnings pressure in the global spirits sector, citing fresh U.S. tariffs, soft consumer demand, and lingering inventory issues following Brown-Forman’s weak guidance for fiscal 2026.
The brokerage cut its earnings estimates for several spirits companies, saying consensus forecasts remain too high. It expects the coming months to be volatile as investor expectations adjust.
The environment for spirits is tough, Jefferies said, pointing to both macroeconomic uncertainty and specific headwinds such as lower used-barrel sales and a major shake-up in Brown-Forman’s U.S. distribution system, its first in over 60 years.
Brown-Forman guided for low-single-digit declines in both organic sales and EBIT in fiscal 2026, after a 3% drop in sales in the prior year.
Jefferies said this points to another “soggy year” and will likely weigh on sentiment for European peers like Diageo (LON:DGE) and Pernod Ricard (EPA:PERP).
Inventory dynamics remain challenging. Jefferies noted that in fiscal 2025, Brown-Forman’s shipments grew 2% while depletions fell 1%, suggesting excess inventory.
It sees less risk of destocking for European companies, though it flagged Remy’s recent €100 million U.S. destocking as a potential technical restock trigger in early fiscal 2026.
The firm expects sell-side estimates for European spirits to fall further, with its own forecasts 5% to 15% below the market.
Diageo, for example, recently warned of “continued uncertainty” in its latest trading update, implying softer-than-expected recovery for fiscal 2026.
Despite cheap valuations, with Pernod trading at 14.1x forward earnings and Diageo at 16.1x on Jefferies’ lower numbers, the path to recovery may remain rocky until forecasts reset more realistically, the firm said.