Constellation Brands posts $51 million loss in 4th-quarter on sliding sales; shares fall

Constellation Brands posts 4Q loss, shares fall

ROCHESTER, N.Y. — Constellation Brands, which markets Mondavi wine, Svedka vodka and Corona beer, said Friday its fiscal fourth-quarter loss narrowed to $51 million on sliding sales on spirits and beer and lingering weakness in the key U.S. wine market.

The world’s biggest wine company by volume, with brands such as Robert Mondavi and Clos Du Bois, also projected its earnings in the current fiscal year will come in well below Wall Street’s average expectation.

In morning trading, Constellation shares fell 61 cents, or 3.6 percent, to $16.24.

The company said it lost the equivalent of 23 cents per share in the quarter ended Feb. 28. That compared with a loss of $406.8 million, or $1.88 cents per share, a year earlier.

Excluding one-time costs, however, it earned 27 cents a share, 3 cents per share better than the average estimates of analysts surveyed by Thomson Reuters.

Sales fell 3.6 percent to $708.7 million from $735.1 million.

The company said it expects to earn $1.53 to $1.68 per share in the 2011 fiscal year, which began March 1. But analysts expect, on average, a profit of $1.77 per share.

The pullback in U.S. consumer spending, including sluggish sales in bars and restaurants, has crimped demand for the $5-to-$20 wine brands that make up the bulk of its business. It also is battling waning sales of high-end beers in its wholesale business joint venture with Mexican brewer Grupo Modelo SA.

Beer sales fell 4 percent in the quarter to $419 million. Spirits sales slumped 49 percent to $48 million, hit by the divestiture of the value spirits business.

Sales of branded wines, which account for the bulk of its revenue, rose 2 percent to $620 million. But in the North American market, they fell 3 percent to $207 million.

Analysts were anticipating some wine-sale hiccups as a revamped distribution network falls into place.

“It’s very hard to fire one distributor and hire another one without having some kind of a repercussion,” said Tim Ramey, an analyst for D.A. Davidson & Co. in Lake Oswego, Ore. “The wine category is outperforming Constellation Brands right now. Constellation Brands’ problems are probably self-inflicted from the distributor realignment.”

While U.S. wine sales are perking up in supermarkets, Ramey said, “we’re not sure yet about bars and restaurants. But when that turns, it will be good leverage.”

The company said Friday it would buy back up to $300 million of its common stock.

After a two-decade acquisition spree, the company sold off cheaper “value” brands to focus on the more lucrative premium end of the wine and spirits markets. Over the last year, its work force fell to 6,600 from 8,000 as it ditched wineries and product lines and consolidated its distribution network.

Based in Victor, 20 miles southeast of Rochester, the company sells about 70 wine brands and liquors such as Paul Masson brandy and Black Velvet Canadian whiskey. It also imports beers such as Negra Modelo from Mexico, Tsingtao from China and St. Pauli Girl from Germany.