Analysts expect liquor company Brown-Forman to report lower 1st-qtr profit amid soft sales

Earnings Preview: Brown-Forman Corp.

LOUISVILLE, Ky. — Liquor company Brown-Forman Corp. reports earnings for its first quarter on Wednesday before the market opens. The following is a summary of key developments and analyst opinion related to the period.

OVERVIEW: Brown-Forman has seen weaker sales as the recession cuts into consumer spending on alcohol. Some higher-priced brands have suffered sales slowdowns as consumers head for less-expensive brands of wines and spirits.

Sales fell 12 percent for the company’s fourth quarter and were down 3 percent for the year, dragged down as well by the strong dollar.

Analysts worried that the company’s challenges could include weakness in Western Europe, which accounts for 35 percent of its sales volume and has been seen as key to Brown-Forman’s profit growth the last few years.

BY THE NUMBERS: Analysts polled by Thomson Reuters, who typically exclude one-time items, expect a profit of 62 cents per share on revenue of $752.8 million. In the same quarter last year, Brown-Forman reported a profit of 69 cents per share on net sales of $790 million.

ANALYST TAKE: Goldman Sachs recently said that pricing in the whiskey category has turned “especially heated.”

When Brown-Forman posted its fourth-quarter earnings, UBS analyst Kaumil S. Gajrawala told clients that distributors’ ordering will take several quarters to improve, and he expects any profit growth in 2010 to come from Brown-Forman cutting costs.

WHAT’S AHEAD: With the important holiday season looming, analysts and investors will be looking for trends in orders from retailers. They will also look for changes in the trend of consumers increasingly drinking at home instead of in bars and restaurants, which has caused retailers to reduce their orders.

STOCK PERFORMANCE: For the three months that ended July 31, shares of Brown-Forman’s Class B shares fell 5 percent to end the quarter at $43.95. They closed Monday at $44.72, near the lower end of their 52-week range of $34.97 to $61.28.