Citing the continuing U.S. housing slump, weakening consumer sentiment and an unexpected bottle tax in Australia that affected sales of its Jim Beam whiskey, Fortune Brands (FO) said earnings for Q2 will be trimmed down to the high-teens-to-mid-20s percentage rate compared to a year ago. Its previously announced target for the quarter was for a decline of high-single-digit-to-mid-teens percentage rate.

Tough Times Down Under

The company is being bombarded from all sides. In Australia, the government, with no advance notice or public debate, imposed a 70% tax on ready-to-drink bottles and cans. This adversely affected FO's top-selling brand of bourbon, Jim Beam.

Though the tax resulted in higher sales of the full-strength Jim Beam, the ready-to-drink version carries a much higher margin and is a highly profitable business for Fortune.

Tough Times Here at Home

In the U.S., the decline in housing and waning consumer confidence dealt the company another blow as Fortune is also a leading maker of windows, cabinets and faucets. And the hits don't stop there: The company also noted consumers are deferring "big ticket" purchases of its Titleist golf clubs (which can cost nearly $500).

So much for diversification. It seems FO can't catch a break (and by the way, when did we all stop drinking and playing golf?)

Down… But Not Out

Sure, things may be tough down under and here in the U.S., but that doesn't mean I'm turning my back FO … not quite yet.

Though second-quarter results are weak, the company says that the second half of FY '08 should be better than the first.

FO is also undertaking an aggressive supply-chain initiative in its home products business to lower costs and align manufacturing capacity with marketplace conditions to drive growth once the market recovers.

And although the company has taken its share of hits in Australia and here at home, it is seeing significant growth in international markets.

I think Rational Investors would be wise to add Fortune Brands (FO) to our wish list as we believe that the time to buy great companies is when other investors are selling. FO shares have lost a whopping third of their value to-date. I wouldn't be surprised if the stock fell lower still, making dollar-cost averaging the way to go here.

If you are looking for additional ways to profit in a tough market, I recommend, "Your 3-Step Guide to Building Wealth in Tough Times," an article Georges Yared published this spring when we thought things couldn't get any worse!

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