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While consumers are trading down for less pricey products and curbing their consumption, especially at bars and restaurants, most alcohol companies are still profitable as they make up with new brands. Though the alcoholic beverages companies seem to be recession-resilient, they are not totally immune from the weak consumer environment.
Reporting to shareholders in its annual report, Constellation Brands' president and chief executive Rob Sands said the company has been facing stiff competitions in the U.K. and Australia in the recent fiscal periods, in particular, the duty increases in the U.K. which have been imposed annually for the past several years. Further, the continuing surplus of Australian wine has made and continues to make very low cost bulk wine available to the U.K. retailers, which has allowed certain of the large retailers to create and build private label brands in the Australian wine category.
While releasing fourth-quarter numbers, the world's largest wine company said it projects fiscal 2010 reported earnings to range between $0.97 and $1.07 per share, including about $106 million charges related to planned operational changes and inventory step-up costs. On a comparable basis, earnings are expected to be in the range of $1.60 - $1.70 per share. Analysts are looking for earnings of $1.62 per share for the full year.
Earlier, the company had said it expects that the challenging macroeconomic operating environment will continue in fiscal 2010, and the year's comparable earnings per share growth will be in the low-to-mid single digit range compared with fiscal 2009.
In the preceding fourth quarter, the Victor, New York-based Constellation Brands incurred a net loss of $406.8 million, narrower than the previous year's loss of $834.8 million, reflecting lower one-time charges compared to last year. Net loss was $1.88 per Class A share, versus a loss of $3.91 Class A per share in the year ago quarter. On a Class B share basis, loss narrowed to $1.71 from prior year's loss of $3.55. Total sales amounted to $964.9 million, down from $1.14 billion last year. Net sales fell 17% to $735.1 million from $884.4 million reported a year earlier.
Among other players, Brown-Forman Corp. (BF-B, BF-A) on June 10 said it expects fiscal 2010 earnings to range between $2.60 and $3.00 per share, citing the general uncertainties of the current environment. Excluding foreign exchange impact of $0.12 per share at recent rates, Brown-Forman projects earnings between $2.72 and $3.12 per share.
Constellation Brands shares, which have been trading between $10.66 and $23.48 in the past 52 weeks, closed Tuesday's trading session at $12.68, up 19 cents or 1.52% on a volume of 4.11 million shares.
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