DOW JONES NEWSWIRES
Constellation Brands Inc. (STZ) lowered its fiscal-year earnings
outlook as woes worsened at the wine maker's U.K. and Australian
businesses, which will bare the brunt of an estimated $430 million
in charges for the just-ended quarter.
The company also projected lower earnings for the new fiscal
year, not the increase analysts had expected, and plans to cut an
undisclosed amount of costs. Details will be announced April 8,
when the company releases its fiscal fourth-quarter results.
The disclosures come as the world's largest wine maker by volume
said it completed the sale of its so-called value-spirits business
to Sazerac Co. for $334 million. The divestiture is part of a plan
to focus on higher-margin premium brands and reduce some of its
acquisition-fueled debt. Borrowings fell more than $800 million
during the latest year, with an additional $210 million to be shed
from the Sazerac deal proceeds.
Amid "an increasingly challenging global economic environment,"
Constellation expects fiscal-year earnings, excluding items, of
$1.60 to $1.62 a share, not January's narrowed view of $1.68 to
$1.72. That excluding the fourth-quarter charges, which will
largely consist of goodwill write-downs and other effects from the
company's international operations.
President and Chief Executive Rob Sands said the most
significant decline in demand during the holiday season occurred in
the U.K., amid a weaker economy and intensified competition.
Constellation also said it chose not to emulate rivals by engaging
in aggressive discounting because it had increased prices earlier
in the year.
The economic difficulties are expected to continue weighing on
results, prompting the company to say per-share earnings for the
new fiscal year should fall by the low- to mid-single digits on a
percentage basis. Analysts surveyed by Thomson Reuters, on average,
had projected increased earnings to $1.81 a share.
North America, said Sands, continues to generate growth for the
wine industry as consumers are still trading up, though not at the
rate of prior growth. The U.S. spirits business is being driven by
the premium Svedka vodka.
Constellation shares closed Tuesday at $13.26 and were inactive
premarket.
-By Mike Barris, Dow Jones Newswires; 201-938-5658;
mike.barris@dowjones.com