Constellation Brands sees sales fall as consumers worry about the economy
Constellation executives said sales fell because consumers are worried about their finances — and the current "socioeconomic environment"
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Constellation Brands, the parent company of Modelo beer in the U.S., lowered its profit outlook for the year and notched a drop in net sales in the latest quarter as customers hesitated to spend and continued to be wary about the economy.
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Overall net sales fell 5.5% to $2.52 billion, while the company’s top line in its beer division slumped 1.7% and wine and spirit sales fell 28%. Constellation attributed the beer sales drop to “socioeconomic headwinds” and said the decrease in wine and spirits was due to lower consumer demand and the sale of its SVEDKA vodka business early this year.
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Constellation’s beer business was hurt by depressed spending and efforts by consumers to save money, a trend that stood out the most in zip codes with bigger Hispanic populations, the company’s CEO and CFO said in prepared remarks. The executives also said that Constellation’s own consumer research showed that most people are worried about the country’s “socioeconomic environment” and personal finances.
“These concerns are impacting social occasions and shopping behaviors with respondents placing gatherings with friends and family in public spaces, gatherings with friends and family at homes, and shopping in convenience stores or gas stations in the top three activities they are doing less of in the last 3 months,” the executives stated.
During Constellation's April earnings call, chief executive Bill Newlands cited an in-house study to explain shifting buying behavior. He cited concerns over "immigration issues" among the company's Hispanic customer base as one of the factors leading to falling sales. The beer producer is supposed to hold its conference call for its latest quarterly results on Wednesday morning and its annual shareholder meeting later this month.
Constellation is now estimating its earnings for the year will be between $12.07 and $12.37 a share, down from its old estimate of $12.33 to $12.63 a share. It maintained its estimate for comparable earnings per share, which is an adjusted gauge of its profit. For the latest quarter, profit fell 41% to $516.1 million, in part because of the company’s drop in sales and some higher expenses.
The company still expects net sales from its beer business, which also includes the brands Pacifico and Corona Extra, to be between flat and up 3% this fiscal year compared to the prior one.