Constellation Brands Inc. said Wednesday it lost $406.8 million in its fourth quarter, narrowly missing Wall Street expectations as it restructured and as holiday season wine sales fell in Britain and Australia.
The world's biggest wine company by volume, with brands such as Robert Mondavi and Clos Du Bois, projected its earnings this fiscal year will fall in a range bracketing Wall Street's average expectation.
The company, which also markets Corona beer and Svedka vodka, lost the equivalent of $1.88 a share in the December-to-February period. But that was less than half its loss of $834.8 million, or $3.91, a year earlier. Sales dipped 17 percent to $735.1 million from $884.4 million.
Its shares fell 59 cents, or 5.1 percent, to close at $11.05 Wednesday.
Excluding one-time charges, it earned $46.7 million, or 21 cents a share. Analysts surveyed by Thomson Reuters expected, on average, earnings per share a penny higher and sales of $790.7 million.
Even in the recession-hardy alcoholic-beverage business, it "sounds like (Constellation Brands) is going into a period of slower to no growth," said Gimme Credit analyst Kim Noland. The company "is targeting the premium end and this might suffer a bit near-term."
Two weeks ago, citing the global economic slowdown, Constellation Brands said it would cut roughly 400 jobs, or 5 percent of its work force of 8,000, this year. It is projecting an annual profit of $1.60 to $1.70 a share, excluding one-time items, and analysts on average expect earnings of $1.65 a share.
In the fiscal year that ended Feb. 28, it lost $301.4 million, or $1.40 a share, versus a loss of $613.3 million, or $2.83 a share, the year before. Net sales fell to $3.65 billion from $3.77 billion.
Restructuring, acquisition-related costs and other one-time items totaled $658 million before taxes, including $468 million in the fourth quarter.
"Turbulent global trading conditions negatively impacted our sales mix in the fourth quarter, which in turn affected our gross profit margins," Chief Executive Robert Sands said. "However, we have been able to partially offset these challenges through cost reductions."
The company has shifted its focus in recent years to the faster-growing and more lucrative premium end of the wine and spirits markets. With the economy worsening, more shoppers reached for cheaper wines this winter, Chief Financial Officer Bob Ryder said in a conference call with analysts.
"If they could save $2 on a bottle of wine, they might buy a lower-end product," he said. "But there was probably some overreaction ... and we don't really expect that to continue to that extent in fiscal 2010."
Branded wine sales slumped 17 percent to $619 million in the quarter, with a 1 percent increase in U.S. sales on a constant currency basis offset by a 16 percent drop in Europe and a 4 percent fall in Australia and New Zealand.
Beer sales in its Crown Imports wholesale business joint venture eased 1 percent to $252 million. Sales of spirits fell 3 percent to $93 million despite a 50 percent gain in organic net sales of Svedka — a premium vodka produced in Sweden that the company acquired in March 2007.
Based in Victor, 20 miles southeast of Rochester, the company's more than 250 brands range from jug wines to coveted California reds, including the Ravenswood, Estancia and Wild Horse labels.
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