24 July 2009 - Fortune Brands Inc reported a higher-than-expected quarterly profit, boosted by cost cuts, but it trimmed the top end of its full-year forecast as the markets for home and golf products remain challenging.
Although lower costs and supply-chain improvements helped Fortune's home products business return to profitability, the company gave a weak outlook for the segment as consumers stay away from big-ticket items.
Fortune, which has been seeing consumers deferring expensive discretionary remodeling projects, said the trend was hurting its kitchen and bath segment in particular. It sees sales at the segment down more than 30 percent in 2009.
On a conference call, the company said the home products industry was likely to see a sales decline in the range of 25 percent in 2009.
"When it comes to the home products market, we can't control the health of the market, but we can control how we compete," said Chief Executive Bruce Carbonari.
For 2009, the company cut the top end of its earnings outlook to $2.30 a share from $2.50, while keeping the low end at $2.00.
Fortune's stock was down 32 cents at $38.89 in early Friday afternoon trading on the New York Stock Exchange.
From slashing its dividend to cutting jobs, from freezing salaries to shuttering factories, the consumer products maker has adopted an array of measures to curtail costs in the recession.
Black & Decker Corp, which makes home improvement products and also reported earnings on Friday, said it did not anticipate a significant improvement in end markets during the rest of the year.
SPIRITS A BRIGHT SPOT
The relative stability of Fortune's spirits business has tempered the impact of the challenging economy and housing slump on its home and hardware businesses.
"Our spirits business benefited in the quarter from our breadth across categories and price points, higher pricing, and the return to volume growth for Jim Beam ready-to-drink products in Australia," Carbonari said in a statement.
The success of new alcoholic drinks such as Red Stag by Jim Beam and Sauza Margarita-in-a-Box also helped Fortune's spirits business.
The maker of Moen faucets, Jim Beam bourbon and Titleist golf equipment said on Friday that net income fell to $99.8 million, or 66 cents a share, in the second quarter from $136.0 million, or 88 cents a share, a year earlier.
Excluding special items, the company earned 70 cents a share. Analysts on average were expecting 63 cents, according to Reuters Estimates.
Net sales fell 17 percent to $1.74 billion. The stronger dollar, which depresses the value of revenue from overseas, reduced sales by 4 percent.
Sales were flat in the spirits business, down 14 percent in golf and down 23 percent in home and hardware.