* Q1 EPS 81 cents tops Street view of 62 cents
* Net sales fall 6.6 pct to $737.9 mln
* Leaves 2010 EPS view unchanged at $2.60-$3.00
* Shares up 7 pct (Adds stock activity, comments from company and analyst, details on expenses, byline)
NEW YORK, Sept 2 (Reuters) - Brown-Forman Corp (BFb.N), the maker of Jack Daniel's whiskey and Southern Comfort, posted a much better-than-expected quarterly profit on Wednesday, helped by lower expenses, and its shares rose 7 percent.
Nevertheless, Brown-Forman left its earnings forecast for the full fiscal year unchanged, saying deep discounting throughout the industry -- which hurt sales in the most recent quarter -- may reappear or even accelerate in the upcoming holiday season.
"Although we saw improvement in our underlying trends ... we remain concerned about the economic, consumer and competitive environments," CFO Donald Berg said on a conference call.
He cited consumers drinking more at home versus in bars or restaurants, consumers turning to smaller bottles or cheaper brands, an overall softening of consumption trends, and retailers and distributors possibly keeping less inventory.
UBS analyst Kaumil Gajrawala said he is cautious about the company's performance for the rest of the year due to difficult comparisons, soft consumer trends and signs that promotions will continue.
"While we believe inventory destocking issues are likely over in the U.S. and Western Europe, we expect soft demand and destocking in Eastern Europe to continue going forward," Gajrawala wrote in a research note.
COST CUTS OFFSET WEAK SALES
Brown-Forman said it earned $121.4 million, or 81 cents per share, for its fiscal first quarter ended July 31, up from $88.2 million, or 58 cents per share, a year earlier.
Analysts on average were expecting a profit of 62 cents per share, according to Reuters Estimates.
Net sales fell 6.6 percent to $737.9 million, hurt by increased store promotions.
Sales by volume was flat, with several key brands experiencing declines. Volume fell 1 percent for Jack Daniel's whiskey, 6 percent for Finlandia vodka and 9 percent for Southern Comfort liqueur. By contrast, the company's new ready-to-drink cocktail products saw large gains.
Selling, general and administrative expenses were down 19 percent, the company said, citing the timing of spending, a reduced cost base and tight management of discretionary expenses.
For example, it said it plans to use a higher proportion of its annual brand spending during September, October, November and December.
The company stood by its fiscal 2010 earnings-per-share outlook, saying it still expects $2.60 to $3.00. Analysts on average expect $2.81 per share.
Brown-Forman shares were up $3.06 at $46.88 near midday on the New York Stock Exchange. The stock was up 25 percent through Tuesday's close from a March low of $34.98. (Reporting by Martinne Geller; editing by Gerald E. McCormick, Maureen Bavdek and John Wallace)