Fortune Brands Inc., which owns the Titleist, Cobra and FootJoy golf brands, slashed its earnings outlook for the second quarter and the full year, citing a challenging consumer environment as a result of soaring fuel costs and a large tax increase in Australia. The company now projects second-quarter adjusted earnings will be down at a 'high-teens-to-mid-20s percentage rate' compared with adjusted earnings of $1.51 a share in the year-ago quarter.


 


Previously, the company had expected adjusted earnings for the quarter to be down in a high-single-digit-to-mid-teens range


 


For 2008, the company expects adjusted earnings will be down at a 'high-single-digit-to-high-teens percentage rate' compared with $5.06 a share in 2007.  Previously, it had forecast earnings to be flat to down at a high-single-digit percentage rate from a year earlier.


 


'Weakening consumer sentiment in the U.S., the ongoing correction in the U.S. housing market, and a large and unexpected Australian tax increase on ready-to-drink spirits products have together created a more challenging environment for the companys products,' the company said in a statement.


           


“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 Brands president and chief executive officer Bruce Carbonari, in a statement.. “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 U.S. housing market has intensified. Together, this means that home improvement purchases and homebuilding remain soft, that many golfers are deferring 'big ticket' purchases of golf clubs, and that trading up to premium spirits brands continues in the U.S. but at a more moderate pace,” Carbonari continued. “Meanwhile, higher costs for commodities such as petroleum-based materials, glass and steel are adding to the pressures facing manufacturers.”


 


“Lastly, in late April – with no advance notice or public debate – the Australian government increased the tax on ready-to-drink spirits products by 70%, resulting in an instant 25% increase in the price to consumers of our market-leading Jim Beam RTD products. Jim Beam is the number one spirit of any kind in Australia, and pre-mixed ready-to-drink products sold in cans and bottles are a large and profitable business for us. While the RTD tax increase has driven an increase in full-strength Jim Beam sales in Australia, this hasn't fully offset the negative impact on our higher margin Jim Beam RTD products. We're moving aggressively to reposition our RTD business to compete in this new environment in Australia,” said Carbonari.


 


“Despite these challenges, we are working hard across Fortune Brands to outperform our categories, drive returns and create shareholder value. We have a foundation of powerful consumer brands, we're successfully gaining market share in key categories, and we continue to see significant growth in international markets. We've also undertaken aggressive supply-chain initiatives in our home products business that are reducing cost structures, aligning our manufacturing capacity with marketplace conditions, and enhancing our flexibility to drive growth when the home products market recovers,” Carbonari added.


 


In sporting goods, Fortune Brands owns Acushnet Company,  whose golf brands include Titleist, Cobra and FootJoy. The company's spirit's brands include Jim Beam, Maker's Mark, Sauza, Canadian Club, Courvoisier, Teacher's and Laphroaig and DeKuypers. Home and hardware brands include Moen faucets, Aristokraft, Omega, Diamond and Kitchen Craft cabinetry, Therma-Tru door systems, Simonton windows, Master Lock padlocks and Waterloo tool storage.