Bank says Southern Comfort a “drag” on Brown-Forman: Sale a good idea

Brown-Forman’s potential sale of Southern Comfort and Chambord is a “strategically sound” move according to RBC Capital Markets analyst Nik Modi  in a statement released late  Tuesday. His complete statement follows:

“Reuters, in an unsubstantiated article, is reporting that Brown-Forman has hired bankers to seek a sale of Southern Comfort and Chambord for potentially “hundreds of millions of dollars’. While the process is still in its early stages, Reuters says that BF has already reached out to prospective buyers. 

“Southern Comfort has recently been one of Brown-Forman’s worst  performing brands, declining at a mid-single digit clip for the last few years, and dragging down the company’s growth in the US. 

“We estimate Southern Comfort is ~8-9% of BF case sales in the US and has been a 1pp drag to total US underlying sales growth YTD CY 2015.  Given the drag the brand has been on performance in recent years and its non-core nature, we view a sale as strategically sound and should help support underlying sales growth trends in the future.”