Constellation Brands beats expectations despite beer sales slump
Constellation Brands delivered stronger-than-expected quarterly earnings, even as beer sales and shipments fell sharply. Cost savings and premium pricing have helped offset volume declines, while the company reaffirms its full-year outlook.
Constellation Brands gave its shareholders a pleasant surprise when it announced earnings for its second quarter to the end of August.
Just a month after significantly downgrading its annual forecasts, it reported earnings of US$3.63 per share above the consensus analysts’ estimate of US$3.35. Sales, however, were 2% lower at US$2.48 billion, below predictions of US$2.51 billion.
The beer division, which accounts for more than 80% of Constellation’s revenues, experienced a 7% fall in sales, driven by an 8.7% drop in shipment volumes as distributors cut inventories and consumers, especially the Hispanic population that favours the upmarket Modelo and Corona brands, restrained their spending.
Operating margin on beers shrank by 200 basis points to 40.6% but remained above forecasts. This reflected higher costs, including aluminium tariffs, offset by favourable pricing and US$65 million in cost savings during the quarter, resulting in half-year savings of US$105 million.
Modelo and Corona see softer demand
Depletions of Modelo Especial were 4% lower, while Corona Extra dropped slightly more than 7%.
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Off-premise sales, which account for 90% of beer volumes, fell by 2.5%, while on-premise sales declined by 3.9%, notably in areas with larger Hispanic populations.
Constellation maintained its guidance for the full year, forecasting overall earnings per share of US$11.30 to US$11.60, with beer net sales to decline by between 2% and 4% and operating income to fall by up to 9%.
Premium wine and spirits outperform
The company said: “Our repositioned wine and spirits business delivered depletion growth during the quarter and outperformed the higher-end wine segment in both dollar sales and volume growth across US tracked channels.
“Following the close of the 2025 wine divestitures, our wine and spirits business is focused exclusively on higher-end wine and craft spirits brands.”
Market reaction and strategic focus
The shares rose by more than 2% on Wall Street, and chief executive Bill Newlands reemphasised that Constellation remains focused on “distribution gains, disciplined innovation, and investing behind our brands,” while continuing to lead the US beer industry in dollar share gains.
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