Beer giant cuts profit forecast as sales dip

Constellation Brands, the company behind popular beers like Modelo and Corona, has revised its profit expectations for the year. This adjustment comes as the company faces a decline in sales due to a challenging economic environment.

Lowered Profit Forecast

Constellation had previously warned in April that higher U.S. beer tariffs would negatively impact sales and consumer demand. The company now expects its earnings per share (EPS) to range between $11.30 and $11.60, down from the earlier estimate of $12.60 to $12.90.

Market Reaction

The news led to an 8% drop in the company's stock price before the market opened. Constellation is scheduled to discuss these changes at the Barclays Global Consumer Staples Conference later in the day.

Consumer Spending Trends

CEO Bill Newlands attributed the decline to a more cautious consumer spending environment. He noted that consumers are purchasing less high-end beer and making fewer trips to the store.

Sales Decline

The company now anticipates a 4% to 6% decrease in overall sales, a shift from its previous prediction of a slight increase or decrease. This drop is primarily driven by a 2% to 4% decline in beer sales.

Financial Adjustments

Constellation has also revised its free cash flow estimate from $1.5 to $1.6 billion to $1.3 to $1.4 billion.

Strategic Focus

Despite the challenges, Newlands emphasized that the company remains focused on its strategic goals, including increasing distribution and investing in its brands. He also highlighted a notable decrease in demand from Hispanic consumers, a trend observed for several months that is more significant than the general market decline.

Mitigation Efforts

To counteract these losses, Constellation announced plans in April to divest from "mainstream" wines and authorized a share repurchase program. The company has already repurchased $604 million worth of shares in the first half of the fiscal year under its three-year $4 billion authorization.