Constellation Brands, the world's #1 wine-maker, said this morning it expects its F2008 earnings to come in between $1.30 and $1.40 a share, well below Wall Street forecasts of $1.83. It foresees a net sales decrease of 12% to 14%. Wine oversupply in Australia and retail consolidation in the UK are among the factors it cites in lowering its outlook. It is cutting wine distributors' inventory levels in the U.S. in an effort to streamline its supply chain and ultimately make its brands more competitive. The company also reiterated its reduced F2007 forecast of $1.65 to $1.70. In its statement, CEO Richard Sands expressed confidence in its long-term prospects: "We recognize fiscal 2008 poses some challenges in our business environment, yet I believe we are making the right decisions, and taking the correct actions, to strengthen Constellation's position for the future. We have built a great business, and we are confident in our ability to generate high-single-digit to low-teen diluted EPS growth over the medium-term to long-term." Shares were down $1.76 (7.5%) to $21.70 in pre-market trading.
Sources: Press Release, MarketWatch, Wall Street Journal
Commentary: Barron's Stocks for a Wealthy America • Beer Is Out, Spirits Are In • Will Chester's Mid-Cap Picks -- Barron's
Stocks/ETFs to watch: Constellation Brands Inc. (STZ). Competitors: Diageo plc (DEO), Brown Forman Corp. (BF.B), Castle Brands Inc. (ROX). ETFs: Consumer Discretionary SPDR ETF (XLY), PowerShares Dynamic Consumer Discretionary (PEZ), Vanguard Consumer Discretionary VIPERs (VCR)
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