Sales Outlook Adjusted Amid Economic Challenges
Constellation Brands announced on Tuesday a significant reduction in its full fiscal year outlook, citing a “challenging” economic landscape impacting alcohol sales. The company, which owns the well-known brands Modelo and Corona, previously warned in April that increased U.S. tariffs on beer would negatively influence its sales and overall consumer demand.
The new guidance for its fiscal 2026 comparable earnings per share now stands at a range of $11.30 to $11.60, a decrease from the earlier forecast of $12.60 to $12.90. Following this news, Constellation’s stock dropped approximately 6% on Tuesday morning, reaching a 52-week low.
CEO’s Statement on Consumer Behavior
During a statement, CEO Bill Newlands highlighted the ongoing difficulties in the macroeconomic environment, which have negatively impacted consumer demand and contributed to erratic purchasing patterns since the first quarter of fiscal 2026. He noted, “Over the last several months, high-end beer buy rates decelerated sequentially, as both trip frequency and spend per trip declined.”
Revised Sales Projections
Constellation now expects organic net sales to decline by 4% to 6%, a notable adjustment from the previous expectation of a 1% growth to a 2% decline. This figure excludes sales from the Svedka vodka brand and other wine products that have been divested.
The company anticipates a 2% to 4% drop in net beer sales, driven by reduced volumes and additional tariff repercussions, contrasting with earlier estimates that sales would remain flat or increase by 3%. Additionally, Constellation is lowering its free cash flow projection from $1.5 to $1.6 billion to a new estimate of $1.3 to $1.4 billion.
Focus on Strategic Objectives
Despite the setbacks, Newlands reaffirmed the company’s commitment to executing its strategic goals, stating, “We remain resolutely focused on continuing to execute against our strategic objectives, including driving distribution gains, disciplined innovation, and investing behind our brands.”
Newlands also pointed out a decline in demand from Hispanic consumers, a trend that has persisted for several months. He mentioned that the dip in high-end beer sales among this demographic was “more pronounced than general market declines.” The brewer has previously attributed this pullback to concerns about President Donald Trump’s immigration policies and potential job losses, underscoring the significance of Hispanic consumers, who account for about half of Constellation’s beer sales.
Efforts to Offset Losses
In response to these challenges, the company has taken measures to recover its losses. In April, it announced plans to reposition its portfolio by divesting from “mainstream” wines. Additionally, Constellation has initiated a share repurchase program, reporting $604 million in buybacks in the first half of the fiscal year as part of a broader $4 billion repurchase authorization over three years.
