DOW JONES NEWSWIRES
Constellation Brands Inc.'s (STZ) fiscal first-quarter earnings
plunged 85% on restructuring costs while wine sales posted another
drop.
Even though the company - the biggest global wine maker by
volume - has been considered recession resistant, it hasn't
necessarily been recession proof. The company has cut jobs and said
earlier this month it would revamp its international operations
amid weakness at its U.K. and Australian businesses.
But the countries saw branded-wine sales rise 6% and 7%,
respectively, in the latest quarter excluding currency changes
along with acquisitions and divestitures.
For the period ended May 31, Constellation posted income of $6.5
million, or 3 cents a share, down from income of $44.6 million, or
20 cents a share, a year earlier. Excluding restructuring and
inventory charges, earnings dipped to 33 cents a share from 34
cents.
Revenue decreased 15% to $791.6 million, in part on
divestitures. Excluding acquisitions and divestitures, sales minus
currency changes rose 1%.
Analysts polled by Thomson Reuters expected earnings of 32 cents
on revenue of $781 million.
Gross margin fell to 33.9% from 35.3%.
Chief Executive Rob Sands said the economic environment remains
challenging, but the company continues to focus on generating cash,
reducing debt and boosting its bottom line. Debt levels fell $110
million during the quarter to $3.71 billion.
Constellation, which produces Mondavi wines and other brands,
has been shifting its focus to higher-priced products, where most
of the growth has been in the alcoholic beverages industry in
recent years.
Branded wine sales, which represent the bulk of its earnings,
fell 10%, but were flat minus currency changes. Spirit sales
slumped 43% on the divestiture of Constellation's "value" business.
Organic sales rose 13% amid a 33% surge at the Svedka vodka
brand.
Shares of Constellation, which affirmed its fiscal-year earnings
outlook, closed Tuesday at $12.68 and haven't traded premarket.
-By Kerry Grace Benn, Dow Jones Newswires; 212-416-2353;
kerry.benn@dowjones.com