Fortune Brands reported sales in its golf division rose 8% in the first quarter, to $396.4 million from $367.1 million. Operating income sunk 3.9% to $51.5 million from $53.6 million. Its golf brands include Titleist, Cobra and FootJoy.
In a statement, the company said that on a continuing operations basis, total sales for Fortune Brands were 5% lower and diluted earnings per share before charges/gains were off 7%. The companys sales in international markets grew by double digits, and worldwide net sales increased for brands including Jim Beam, Courvoisier, Teachers, Titleist, Cobra, FootJoy and Master Lock.
“Even with the U.S. housing correction and challenges in the U.S. economy, results in our seasonally smallest quarter achieved our previously announced earnings target range,” said Bruce Carbonari, president and chief executive officer of Fortune Brands. “Were continuing to move aggressively to best position our business to compete in this environment and over the long term. That includes reducing cost structures in our home products business, sharply focusing on company-wide productivity initiatives, and continuing strategic investments to fuel long-term growth across our brands.”
“Specifically, were determined to maintain strategic spending to support brand building, new products and international expansion,” Carbonari continued. “While new investments in these targeted growth initiatives reduced first-quarter operating income in our spirits and golf segments, we believe that these are the right investments to help drive sustainable long-term growth. Furthermore, our underlying performance was better than our reported first-quarter numbers indicate, and we expect improved performance in the second half of the year.
Specifically regarding the golf segment, Carbonari said, “new advanced-technology products helped us achieve a first-quarter sales record with growth in every product category and in all key geographies. That included especially strong growth in Japan and Korea, two key markets where were investing to expand our business.”
Looking ahead, the company is seeing a delayed start to the golf playing season in many northern U.S. markets due to bad weather. “On the upside, our new golf products are being well received in the marketplace and we expect U.S. spirits shipments to bounce back in the months ahead,” said Carbonari.
On a company-wide basis, net income was $108 million, or $0.69 per diluted share, down 12% from $0.78 in the year-ago quarter. Comparisons were impacted by a $0.03 per share charge for one-time expenses related to the company's participation in the V&S auction process. Results in both the current and prior-year periods also reflected $0.03 per share in restructuring-related charges. Excluding one-time items in both the current and prior-year periods, diluted EPS before charges/gains was $0.75, down 7% from $0.81 in the year-ago quarter.
Fortune Brands said these results were within the company's previously announced target range for diluted EPS before charges/gains to be in the range of flat to down at a high-single-digit rate.
Net sales were $1.81 billion, down 5%. On a comparable basis, excluding excise taxes and foreign exchange, total net sales would have been down 7%.
Operating income was $227 million, down 11%.
On a company-wide basis, Fortune Brands is targeting diluted EPS before charges/gains for the second quarter to be down at a high-single-digit to mid-teens rate. That compares with EPS before charges/gains from continuing operations of $1.51 for the second quarter of 2007.
“We expect second-half results to be better than the first half, as we drive growth in spirits, outperform the home products market, progressively benefit from our company-wide productivity initiatives, and as our strategic brand investments annualize,” Carbonari added. “For the full year, were continuing to target results within the range we established at the beginning of the year. However, given the uncertain U.S. economic environment, were narrowing our full-year target range. Were now targeting diluted EPS before charges/gains to be in the range of flat to down at a high-single-digit rate. Thats versus $5.06 for 2007.”
