* Q2 EPS, ex-items, $0.54 beats Street view $0.41
* Net sales drop 8 pct, but top Street view
* Still sees fiscal year EPS $1.60-$1.70
* Lowered debt by $155 mln in Q2
* Shares up 5.2 percent (Adds company, analyst comments, byline, updates stock move)
By Jessica Wohl
CHICAGO, Oct 1 (Reuters) - U.S. wine and spirits maker Constellation Brands Inc (STZ.N) posted a better-than-expected quarterly profit, helped by sales to new distributors, but maintained its fiscal year forecast as it works to trim costs and boost growth.
The shares of the company, whose products include Robert Mondavi wine and Svedka vodka, rose more than 4 percent.
Constellation’s sales and margins have suffered as many consumers seek out lower-priced drinks in the economic downturn. Grocery store shoppers are starting to buy some higher-end wines again, but alcohol sales at convenience stores, bars and restaurants remain tough, the company said.
“The macroeconomic environment remains challenging, but we are beginning to see some signs of stabilization,” Chief Executive Rob Sands said.
The company expects a lower profit from its U.S. beer venture with Grupo Modelo GMODELOC.MX this year, as brands such as Corona remain under pressure.
Constellation, which sold off some less-expensive brands, is closing some facilities, cutting jobs and consolidating distribution. It has also cut more than $1 billion in debt since March 2008.
The company should complete its U.S. wine and spirits distributor network consolidation within a year, giving it exclusive relationships with distributors in 30 states that account for about two-thirds of its wine and spirits volume across the country, Sands said.
Constellation earned $99.7 million, or 45 cents a share, in the fiscal second quarter ended on Aug. 31, compared with a net loss of $22.7 million, or 11 cents a share, a year earlier.
Excluding certain items, the company earned 54 cents a share, up from 45 cents a year ago and well ahead of analysts’ average forecast of 41 cents, according to Reuters Estimates.
Much of the growth in the latest quarter came from Constellation’s decision to ship additional inventories to newly appointed distributors. Therefore, the company expects sales to distributors will not be as large as they typically are in the current third quarter.
Constellation said it still expects to earn $1.60 to $1.70 per share in fiscal 2010, which ends in February, compared with $1.60 in fiscal 2009.
Maintaining that view implies Wall Street will trim its estimates for the current quarter, which historically has been Constellation’s largest quarter for profit, Stifel Nicolaus analyst Mark Swartzberg said.
Swartzberg, who rates Constellation a “buy,” kept his fiscal year forecast unchanged at $1.60, but trimmed his third and fourth quarter estimates.
Second-quarter net sales fell 8 percent to $876.8 million, pressured by the sale of brands such as Barton and Chi-Chi’s premixed cocktails and currency rate changes.
Excluding such factors, sales rose 4 percent.
Analysts were looking for revenue of $835.8 million.
Sales in the Crown Imports joint venture, which distributes Corona and some other beers in the United States, fell 5 percent and have now fallen in three consecutive quarters.
Constellation’s equity earnings from its 50 percent interest in the venture fell 3 percent. Constellation expected such earnings to be down slightly this year and is now calling for a high single digit decline.
Crown Imports is beefing up advertising behind Corona and will introduce 24 ounce cans of Corona Extra and Corona Light in convenience stores. It also plans to do more advertising for the brands during National Football League games and the upcoming Major League baseball playoffs.
In the wine business, Sands said Constellation estimates the U.S. industry’s grape harvest will be similar in size or slightly larger than it was in 2008, with a quality output. He said prices have softened slightly due to demand.
The company said it would outline more of its plans at a Nov. 11 investor conference in New York.
Constellation shares, which have risen more than 27 percent in the last six months, were up 5.2 percent at $15.94 in afternoon trading. (Reporting by Shradhha Sharma in Bangalore and Jessica Wohl in Chicago; editing by Vinu Pilakkott, Dave Zimmerman and Andre Grenon)