Constellation Brands stuns investors with sharp downgrade

Constellation Brands has shocked investors by slashing its earnings and sales forecasts for the year ahead. The move follows weak quarterly results and echoes a similar profit warning from rival Diageo in 2023.

The news comes after the publication of poor results for the May to July quarter and has echoes of Diageo’s sudden profits warning in November 2023.

After announcing the downward revisions to its forecasts, Constellation’s shares fell by 8% on Wall Street. They have lost more than a third in value so far this year and have virtually halved in the past 18 months.

Earnings and sales guidance cut

The company now expects comparable earnings per share of between US$11.30 and $11.60, significantly below its previous guidance of $12.60 to $12.90 and well below analysts’ consensus forecasts of $12.66.

Constellation also lowered its organic net sales projection for the full year, pointing to a probable fall of between 4% and 6% versus its earlier guidance of a drop no larger than 2%.

CEO points to tough consumer backdrop

President and CEO Bill Newlands said: “We continue to navigate a challenging macroeconomic environment that has dampened consumer demand and led to more volatile consumer purchasing behaviour since our first quarter of fiscal 2026.”

Over the last several months, high-end beer buy rates decelerated sequentially, as both trip frequency and spend per trip declined. Notably, high-end beer buy rate declines for Hispanic consumers [who favour Constellation’s Mexican Modelo and Corona brands] were more pronounced than general market declines, which has an outsized impact on our Beer Business compared to the broader beer category.

Market share still growing

Newlands added that in the three months to the end of July, Constellation “grew volume share in 49 of 50 states(3), and in Circana channels our beer business remained the top dollar share gainer in the total US beer category with a 0.4 point increase”.

Despite that, Constellation expects shipments to distributors to be about 7% below sales to their customers as stock levels are rebalanced.
Strategy unchanged. “We remain resolutely focused on continuing to execute against our strategic objectives, including driving distribution gains, disciplined innovation, and investing behind our brands,” Newlands concluded.

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