Constellation Brands has revised its 2025 fiscal outlook amid ongoing struggles in its wine and spirits business and consumer headwinds.
The company revised its wine and spirits net sales projections for its wine and spirits business from between -0.5% and +0.5%, to between -6% and -4%. The importer of Mexican brands Corona, Modelo, Pacifico and Victoria also ticked down its beer projections from between +7% and +9%, to between +6% and +8%.
Enterprise net sales growth is now revised lower too from between +6% and +7%, to between +4% and +6%.
Notably, Constellation will take a non-cash goodwill impairment charge of around $1.5 billion to $2.5 billion in its fiscal quarter ending August 31, 2024. The company will report Q2 earnings on October 3.
The company wrote: “The range in the amount of impairment expected to be recorded is based on preliminary estimates of future cash flow forecasts and other assumptions.”
This may not be the last write down on the company’s wine and spirits goodwill, Constellation added.
Constellation’s reported enterprise operating income growth was revised from between +10% and +12%, to between -68% and -36%, which the company attributed to “incremental macroeconomic headwinds affecting consumer, particularly unemployment and prolonged inventory destocking in wine and spirits markets.”
Operating income growth for beer is projected at +11% to +12%, up from +10% to +12%, due to incremental cost savings, only partially offset by increased marketing investments.
Wine and spirits operating income declines are now projected at -18% to -16%, up from -11% to -9%.
Constellation Brands president and CEO Bill Newlands said in the announcement: “While ongoing macroeconomic headwinds, particularly rising unemployment, have led to a recent deceleration in the rate of growth of consumer demand for our products, we are on track to deliver a solid mid single-digit volume increase this fiscal year for our beer business.
“These trends have been most notable in the top five states for our beer business, which account for just over half of our volumes; however, we continue to see volume growth within the low to mid single-digit range in these states and within the high single-digit range on average across the rest of the country.
“Importantly, our beer brands remain strong and loyalty among our core consumers is resilient with only some marginal shifts to value packs and value-oriented channels.
“In our wine and spirits business, the commercial and operational execution initiatives introduced earlier this year are improving the performance of our largest brands, but we continue to face incremental category headwinds further affecting our outlook for this fiscal year.”
Constellation earnings per share guidance was revised to $3.05 to $7.92, from $14.63 to $14.93, while its comparable earnings per share guidance increased on the lower-end to $13.60 to $13.80, up from $13.50 to $13.80.
Constellation executives are taking part in a fireside chat today as part of the Barclays Global COnsumer Staples Conference. Brewbound will report highlights of that conversation in Wednesday’s issue.