Wine and spirit maker Constellation Brands may have posted a loss in its fiscal second-quarter profits, but the company also reported swift sales of vodka and premium wines.
Constellation, which holds the crown of world's largest wine producer, said net sales rose 7 percent in the quarter to $1.24 billion, mainly on the strength of its wine brands (including Wild Horse and Woodbridge by Robert Mondavi) and spirits (big gains were had by brands including Svedka Vodka and 99 Schnapps).
Restructuring charges—relating largely to the sale of some of the company's Australian assets—brought profits down, but without the charges, earnings would have been $99 million, or 45 cents a share, up from year-ago profits of $77 million, or 35 cents. The company also beat Wall Street's estimates by a penny a share. It pegs full-year earnings at 83 cents to 91 cents per share (or $1.68 to $1.76 adjusted).
Constellation's shares (symbol STZ), which closed at $22 yesterday, have risen more than 18 percent since April. At 1:30 p.m. today, the stock was down more than 5 percent, trading at $20.34.
Recently, I talked with Charles Norton of the Vice Fund about how so-called sin stocks tend to stay afloat in tough economic times. He also told me that distillers have been less affected by cost pressures than the beer industry. He likes Diageo, which has a large international distribution network and is gaining market share in a handful of spirits categories. "It's the 800-pound gorilla in categories like vodka and tequila that are growing even faster than the overall spirits market," he said. Diageo's stock, at $70, has been on the decline this year, but it has held fairly steady since July.
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John Macaluso of CA 12:10PM November 30, 2008
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of 4:10PM October 02, 2008