NEW YORK (Reuters) - Constellation Brands Inc (STZ.N) reported higher-than-expected first-quarter earnings on Thursday, but lowered its full-year net profit forecast due to one-time charges related to cost-cutting measures.
The maker of Robert Mondavi wine and Svedka vodka said it plans to cut about 100 jobs, or 2.3 percent of its workforce, as part of a business realignment meant to save money it embarked upon following the sale of its Australian and U.K. wine businesses.
The company expects the moves to save it more than $10 million, with most of the savings realized in fiscal 2013.
Excluding a one-time charge of about $26 million related to the cost-savings, Constellation said it still expects fiscal 2012 earnings of $1.90 to $2 per share. Including the charge, earnings should range from $1.82 to $1.92 per share, down from $2.62 per share last year.
Constellation shares were down 0.5 percent at $20.86 in morning trading on the New York Stock Exchange. Through Wednesday’s close they had fallen nearly 10 percent from a 52-week high touched in May.
In the first quarter of fiscal 2012, which ended on May 31, Constellation had net earnings of $74.5 million, or 35 cents per share, up from $49.1 million, or 22 cents per share, a year earlier.
Excluding one-time items, profit was 39 cents per share. On that basis, analysts on average were expecting 37 cents per share, according to Thomson Reuters I/B/E/S.
Net sales fell 19 percent to $635.3 million, hurt by divestitures. Analysts were expecting $628.6 million.
In North America, net sales rose 2 percent, helped by fewer promotions and selling a greater proportion of more expensive wines. But volume fell due to price increases on certain wines.
Stifel Nicolaus analyst Mark Swartzberg said he “remains skeptical” about Constellation’s ability to increase its wine volume without “a structural increase in marketing/promotional spending.”. Still, Swartzberg said the business produces steady cash flow and called the market’s valuation of the wine business “reasonable.” He reiterated his “Hold” rating on the shares.
Constellation’s equity income from its joint venture with Mexico’s Grupo Modelo GMODELOC.MX rose 10 percent to $60 million. Sales of the venture, which imports beers like Corona into the United States, rose 9 percent.
Reporting by Martinne Geller, editing by Gerald E. McCormick, John Wallace, Dave Zimmerman