Constellation Brands Inc., which sells Robert Mondavi wine, Svedka vodka and Corona beer, said Thursday its first-quarter profit jumped 52 percent to $75 million on cost-cutting efforts and improved sales of wine, spirits and imported beers in North America.
Overall revenue, however, dropped 19 percent to $635 million largely because the company shed the bulk of its struggling Australian and British wine business in January.
Net income equaled 35 cents per share, beating Wall Street expectations. A year earlier, the company earned $49.1 million, or 22 cents a share, as sliding domestic sales of wine were more than offset by lower restructuring charges.
Wine and spirits sales rose 3 percent in the key North American market in the March-to-May quarter.
After a sharp falloff in wine sales in 2009, especially in bars and restaurants, industry volumes have been rebounding this year as Americans take advantage of more discounts to trade up to higher-priced brands.
"Wine sales are accelerating very nicely, particularly in the above-$20 segment, but kind of everything from $8 up is seeing nice growth," said analyst Tim Ramey of D.A. Davidson & Co. in Lake Oswego, Ore. "It's not like it's on fire or anything yet, but it is positive."
Excluding one-time items, including a $26 million charge related to the divestiture, Constellation earned 39 cents per share. Wall Street expected 37 cents, according to FactSet. However, revenue came in below analysts' expectations of $637 million.
Company shares fell 27 cents, or 1.3 percent, to $20.70 in afternoon trading. The stock remains at the upper end of a 52-week range of $15.26 to $23.19.
Boosted by volume growth in its imported beers, operating earnings from its Crown Imports joint venture with Mexican brewer Grupo Modelo SA rose 10 percent to $120 million on a 9 percent rise in sales of $678 million.
In contrast, U.S. sales of domestic beers have been lackluster this year with core customers _ men ages 21 to 34 _ hard hit by the tough economy.
"Crown delivered a surprise to the upside," UBS analyst Kaumil Gajrawala said in a note to clients, largely because of a robust spring rollout of Victoria, Mexico's oldest beer. Grupo Modelo has owned the Victoria brand since 1935.
The company said it expects to earn between $1.82 and $1.92 a share in the current fiscal year, down from $2.62 in the previous fiscal year that ended in February. It reaffirmed that adjusted earnings will range from $1.90 to $2 per share, compared with $1.91 a year earlier.
Based in Victor, N.Y., 20 miles southeast of Rochester, Constellation lost its eight-year status as the world's No. 1 winemaker when it offloaded 80 percent of its Australian and British wine business.
As a result, it has now launched a realignment effort "to increase efficiencies and streamline our organization worldwide," CEO Robert Sands said in a conference call with analysts. "We have significantly improved our financial profile and simplified our business."
Investors expect the sale to create a more profitable business with less risk.
Constellation has been shifting to higher-priced brands and remains the world's biggest seller of wines priced between $5 and $20. Wine sales still account for more than 90 percent of its revenue.
Its wines include Clos du Bois, Woodbridge by Robert Mondavi, Blackstone and Ravenswood. It also sells liquors such as Black Velvet Canadian whiskey and imports such beers as Modelo Especiale from Mexico, Tsingtao from China and St. Pauli Girl from Germany.
With 6,000 employees, Constellation is No. 2 in the global rankings of wine makers behind E. & J. Gallo Winery of Modesto, Calif. It had moved ahead of Gallo in 2003, when it bought Australian vintner BRL Hardy Ltd. for $1.1 billion.