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 The world's biggest wine company by volume, with brands such as Robert Mondavi and Clos Du Bois, said its fiscal fourth-quarter loss from December through February narrowed to $51 million on sliding sales on spirits and beer and lingering weakness in the key North American wine market.
The company projected profits in its current fiscal year, which began March 1, will come in well below Wall Street's average expectation. It expects to earn $1.53 to $1.68 per share, while analysts had predicted a $1.77 profit.
Constellation shares fell 42 cents, or 2.5 percent, to close at $16.43 Friday.
Constellation said it lost the equivalent of 23 cents a share in the quarter. That compared with a loss of $406.8 million, or $1.88 cents a share, a year earlier. Excluding one-time costs, however, it earned 27 cents a share, 3 cents better than the average estimates of analysts surveyed by Thomson Reuters.
Sales fell 3.6 percent to $708.7 million from $735.1 million.
The pullback in U.S. consumer spending has crimped demand for the $5-to-$20 wine brands that make up the bulk of its business. It also is battling waning sales of high-end beers in its wholesale business joint venture with Mexican brewer Grupo Model SA.
"In 2009, the wine business was probably flat to up slightly, and in 2010 we're not projecting anything much different than that," CEO Rob Sands said in a conference call with analysts.
"The industry is fundamentally healthy ... but we do see a continuation of the negative trend" in bars and restaurants offsetting gains in grocery, mass-merchandise and club stores, Sands said. "If the economy improves and unemployment abates, that may change. But at the moment ... there's been some pretty significant trends of people staying at home, eating at home, not going out as much."
Beer sales fell 4 percent in the quarter to $419 million. Spirits sales slumped 49 percent to $48 million, hit by the divestiture of the value spirits business.
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 Sales of branded wines, which account for the bulk of its revenue, rose 2 percent to $620 million. But in North America, they fell 3 percent to $207 million.
Analysts were anticipating some wine-sale hiccups as a revamped distribution network falls into place.
"It's very hard to fire one distributor and hire another one without having some kind of a repercussion," said Tim Ramey, an analyst for D.A. Davidson & Co. in Lake Oswego, Ore. "The wine category is outperforming Constellation Brands right now. Constellation Brands' problems are probably self-inflicted from the distributor realignment."
While U.S. wine sales are perking up in supermarkets, Ramey said, "we're not sure yet about bars and restaurants. But when that turns, it will be good leverage."
After a two-decade acquisition spree, the company sold off cheaper "value" brands to focus on the more lucrative premium end of the wine and spirits markets. Over the last year, its work force fell to 6,600 from 8,000 as it ditched wineries and product lines and consolidated its distribution network.
Based in Victor, 20 miles southeast of Rochester, the company sells about 70 wine brands and liquors such as Paul Masson brandy and Black Velvet Canadian whiskey. It also imports beers such as Negra Modelo from Mexico, Tsingtao from China and St. Pauli Girl from Germany.
[Associated
Press; By BEN DOBBIN]
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