Fortune Brands, Inc. (FO)

NetscribeConsGds (93.25) Submitted: 5/15/07 7:31 AM : Start Price: $77.27 FO Score: 12.83

Fortune brands with unfortunate products!!!





The U.S. economy is struggling with downturn in housing market. The U.S. mortgage default rates hit an all-time high in the first quarter of 2007 and has refrained people to renovate their home. Fortune brand seems to be the victim of cruel housing market environment, which derives more than half of its revenues from Home and Hardware segment.





Revenues for first quarter of 2007 from Home and Hardware segment declined a mere 1% despite a decline of more than 10% in the U.S. home products market. Revenues benefited from acquisition of Simonton, new products and line extensions. While comparable sales for our Home products brands were off in the range of 10%. The Spirit and Wine segment displayed some resistance by posting a positive growth in operating profit. However, the transition in distribution for Spain to its Maxxium Worldwide joint venture has dragged down the revenue growth by 9% in Sprit and Wine segment. Strong global consumer demand for our premium and super-premium spirits and wine brands drove mid-single-digit growth in distributor case volume shipments, led by double-digit growth for Sauza, Courvoisier and Teacher's.





The company expects that the downturn in the overall U.S. home products market would persist and would display double-digit rate decline in 2007. Consequently, this will to continue to impact results for home products brands. However, the company believes strong performance in Spirits and Wine and growth in Golf will help offset lower results for our home products brands. But in reality it seems a tough ask for the company to break-even, unless and until it shifts a major part of its portfolio towards Spirits and Wine segment.

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