US: Economic pressures, tax hikes force Fortune Brands forecast review
Fortune Brands has moved to revise its earnings expectations going forward, due to "weakening consumer sentiment" in the US and the hike in RTD taxes in Australia.
The US-based company, which owns Beam Global Spirits & Wine, said yesterday (30 June) that it was updating its forecast for second quarter EPS to fall by a high-teens to mid-20s percentage rate. The company had previously forecast EPS for the quarter to be down by a high-single-digit-to-mid-teens percentage rate.
For the full-year 2008, the company said it now expects to generate EPS down by a high-single-digit-to-high-teens percentage rate. The company's previous full-year target was for EPS to be flat to down at a high-single-digit percentage rate versus 2007's results.
"The environment has become more challenging for our brands and the second quarter is shaping up to be more difficult than we had anticipated," said Fortune's president and CEO Bruce Carbonari. "April was a solid month that tracked with our expectations, followed by softer-than-anticipated results in May. We've seen continued softness in June and it's now clear that we will not make up the May shortfall.
"With the rapid spike in gasoline prices and the decline in consumer confidence, we're seeing American consumers pull back. At the same time, the correction in the US housing market has intensified. Trading up to premium spirits brands continues in the US but at a more moderate pace."
Carbonari also highlighted the introduction - "with no advance notice or public debate" of a rise in the tax on RTD spirits products in Australia by 70% in April. The move, designed to discourage irresponsible drinking, resulted in an instant 25% increase in the price of Jim Beam RTD products. "Jim Beam is the number one spirit of any kind in Australia, and pre-mixed RTD products sold in cans and bottles are a large and profitable business for us," Carbonari said.
Fortune is set to release its second quarter results towards the end of this month.
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