March 10, 2010 / 1:15 PM / 8 years ago

UPDATE 4-Brown-Forman profit beats; economic concerns weigh

* Cites concern that weak economy will hurt alcohol sales

* Sees ‘10 EPS $3.05 to $3.15 ex-items; Wall St view $3.08

* Q3 adj EPS 80 cents tops Street expectation for 70 cents

* Sales rise nearly 10 pct to $861.7 mln

* Shares down 2.4 pct (Adds executive and analyst comments)

By Martinne Geller

NEW YORK, March 10 (Reuters) - Brown-Forman Corp (BFb.N) said the weak economy might keep pressuring alcohol sales, sending its shares down more than 2 percent despite its better-than-expected quarterly profit and improved outlook.

Like other alcoholic beverage companies, the owner of Jack Daniel’s whiskey and Finlandia vodka has suffered as consumers spend less money at restaurants and bars in favor of drinking at home.

Consumers are often more price-conscious when shopping at liquor stores, where the profit margins also tend to be slimmer.

“We continue to be cautious, given the level of trading down that we have seen throughout the U.S.,” Chief Financial Officer Don Berg said on a conference call.

Brown-Forman shares were down 2.4 percent at $54.55 in afternoon trading.

Executives of company, which also owns Southern Comfort, said on the conference call that they expected full-year earnings of $3.05 to $3.15 per share, excluding a 7-cent impairment charge taken in the latest quarter.

On that basis, its prior outlook was $2.95 to $3.15 per share. Analysts on average had forecast $3.08, according to Thomson Reuters I/B/E/S.

For its third quarter, which ended on Jan. 31, Brown-Forman said net income fell to $107.9 million, or 73 cents per share, from $123.4 million, or 81 cents per share, a year earlier.

    Excluding the noncash trademark impairment charge on its Don Eduardo tequila, Brown-Forman earned 80 cents per share, topping the analysts’ average estimate of 70 cents.

    Yet Goldman Sachs analyst Lindsay Drucker Mann cautioned investors against “an overly enthusiastic take” on the quarter. This was one of Brown-Forman’s worst quarters on an underlying basis, she said, with inventory shifts and currency fluctuations accounting for most of the earnings beat.

    She added that she was concerned about the company’s ability to raise prices after a few quarters of declines, as well as Brown-Forman’s negative view of the industry.

    The company said its selling, general and administration expenses were higher than a year earlier, when it adjusted performance-related bonuses following a downturn in its business.

    Net sales rose nearly 10 percent to $861.7 million.

    Sales of Jack Daniel’s brands -- Brown-Forman’s flagship label -- rose at a mid-single-digit percentage rate. The company estimated that trade inventories had returned to more normal levels after the economic downturn led many wholesalers and retailers to cut back.

    Jack Daniel’s sales rose 1 percent in the United States and 8 percent internationally. The company said increases in the United States, Germany, France and Mexico more than offset declines in Italy, Britain and South Korea. (Reporting by Martinne Geller, editing by Maureen Bavdek and Lisa Von Ahn)

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