Brown-Forman enters holiday season 'cautiously optimistic about 2H14

In addition to the more challenging comparisons in Japan in 2H, the company also anticipates a difficult comparison in Mexico in Q4. The company feels well positioned for holiday season in U.K, but says entering holiday season "cautiously optimistic" about 2H14. Says expects price increases, improved mix and cost inflation will help drive FY gross margin expansion, although at a slightly slower rate than in 1H. Sees 1H operating income growth of 13% moderating in 2H. Capital allocation plans include finding high-return investments that can drive long-term sustainable growth, dividends, buybacks. Says keeping eyes open for assets in M&A strategy. New distribution rates in Japan expected to moderate in January 2014. Sees double-digit growth in the next half of the year for Jack Daniels. Year to date, Brown-Forman has Invested about $60M for large-scale expansions. Expects these capital requirements to moderate in 2015. Says the company is "very well positioned" for the future. Comments made on the company's Q2 earnings conference call.

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