NEW YORK (Reuters) - Fortune Brands Inc (FO.N) reported a quarterly profit that topped Wall Street's lowered expectations on Friday, after the consumer products maker had warned that weak consumer sentiment, the U.S. housing slump and higher taxes would depress earnings more than expected.
The maker of Jim Beam bourbon, Moen faucets and Titleist golf equipment said second-quarter net profit fell 41 percent to $136 million, or 88 cents per share, from $232 million, or $1.48 per share, a year earlier.
The results include a $60 million charge for items such as a write-down of the company's door business due to the housing slowdown.
Excluding special items, earnings were $1.25 per share, beating the analysts' average forecast of $1.20, according to Reuters Estimates.
Fortune also affirmed its full-year earnings outlook, raised its divided 5 percent and said it bought back a 10 percent stake in its spirits business owned by Sweden's Vin & Sprit (VSG.UL) for $464 million.
Its shares, which at Thursday's close were down 19 percent this year, were little changed on Friday.
Investor enthusiasm was probably muted as weakness across the company's portfolio drove operating earnings down 24 percent, according to Goldman Sachs analyst Judy Hong.
"We are neutral on the stock as we expect continued housing weakness and soft spirits results will be overhangs, but valuation is undemanding here," Hong wrote in a research note, adding that commodity cost inflation and debt reduction were also ongoing challenges.
Fortune Brands warned last month that quarterly earnings from continuing operations would probably decline at a steeper-than-expected percentage rate in the high teens to mid-20s. Among the reasons cited was an unexpected Australian tax increase on ready-to-drink spirits products, which raised the price of its popular Beam and Cola drinks by about 25 percent, causing sales to drop.
Quarterly net sales fell 8.6 percent to $2.10 billion as higher U.S. spirits shipments and strong golf and home products sales in Asia could not fully offset the impact of the U.S. housing slump and the softening consumer environment.
Excluding the impact of excise taxes and foreign exchange rates, net sales fell 10 percent.
Chief Executive Bruce Carbonari said the environment in the second quarter was tougher than expected.
"Clearly the U.S. housing market has been the biggest headwind we faced and it's been more challenging than we anticipated three months ago," Carbonari said on a conference call.
Sales at the home and hardware unit fell 14 percent while operating income fell 30 percent. Fortune said it now sees that unit's operating margins falling 2.5 percentage points this year.
SPIRITS, GOLF ALSO WEAK
Sales in the company's spirits business, which includes Sauza tequila and Courvoisier cognac, fell 1 percent while operating income fell 14 percent. Higher U.S. sales were offset by a decline abroad due to the Australian tax, a disruption with a Mexican distributor and a weak economy in Spain.
Despite the growth at home, Carbonari did note a shift in U.S. sales from bars and restaurants to home consumption.
The U.S. market has grown 2 to 4 percent in recent years and 2008 should grow at the low end of that range, Carbonari said.
The golf unit's sales fell 5 percent in the quarter while operating income fell 23 percent, due to brand investments and close-outs on certain items to make way for new introductions.
For the third quarter, the company said earnings, excluding special items, would be down in the mid-teens to mid-20s percentages from $1.34 a share a year ago.
For the full year, Fortune still forecast earnings before items falling at a percentage rate in the high single digits to the high teens, from $5.06 per share in 2007.
Analysts on average were expecting Fortune to earn $1.17 per share in the third quarter, down 12.7 percent from a year earlier, and $4.36 per share for the full year, down 13.8 percent from 2007.
Fortune shares were up 3 cents at $58.32 on the New York Stock Exchange in afternoon trading.
(Reporting by Martinne Geller; Editing by Gerald E. McCormick)
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