Liquor company Constellation Brands says 1Q profit surged but offers dim full-year outlook

Constellation Brands’ first-quarter profit surges

VICTOR, N.Y. — Constellation Brands Inc., the world’s biggest winemaker, said Thursday that its first-quarter net income surged more than sevenfold with distribution improvements, even as its revenue slipped.

The maker of Mondavi wine, Svedka vodka and Corona beer also announced a $300 million stock buyback and increased its forecast for fiscal 2011.

For the three months that ended May 31, Constellation earned $49.1 million, or 22 cents per share. In the same period last year, the company earned $6.5 million, or 3 cents per share.

Its revenue slipped less than 1 percent to $787.5 million, as volume fell 1 percent.

Excluding restructuring and other one-time items, Constellation’s net income climbed to 38 cents a share, beating Wall Street expectations.

Analysts polled by Thomson Reuters, whose estimates typically exclude one-time items, expected the company to earn 35 cents a share. But they expected higher revenue of $798.5 million.

For the fiscal year that began March 1, the company now expects to earn $1.63 to $1.78 per share, up from a forecast of $1.53 to $1.68 it made three months ago. The company said the increase reflects the benefit it expects from accelerating its share buyback program, it said.

Wine sales, which account for the bulk of Constellation Brands’ revenue, fell 5 percent on a constant-currency basis to $729 million. In North America, they decreased 2 percent to $532 million as increased volume was more than offset by higher promotion costs.

Spirits sales fell 3 percent to $58 million, hit by the divestiture of their lower-end liquor brands, even as Svedka vodka sales jumped 40 percent.

Constellation Brands has shifted its focus toward higher-price wines and spirits in recent years, but moderate-price wine still make up the bulk of its business. And those sales have fallen as consumers keep a tight rein on spending in bars and restaurants.

Constellation, based in Victor, N.Y., 20 miles southeast of Rochester, offers more than 70 wine brands including Clos du Bois, Woodbridge by Robert Mondavi, Blackstone and Ravenswood.

Its liquors run from Svedka vodka to Paul Masson brandy and Black Velvet Canadian whiskey. It imports beers such as Corona and Negra Modelo from Mexico, Tsingtao from China and St. Pauli Girl from Germany.

After a two-decade acquisition spree, the company sold off some of its lower-price brands to focus on the more lucrative premium end of the wine and spirits markets. In recent years, it has sold off unprofitable brands, consolidated divisions and cut its work force to 6,000 people from 8,200 in 2008.