Constellation Brands(US:STZ)2026-01-08 19:01Financial Performance - Net sales for the nine months ended November 30, 2025, were $7,218.8 million, down 10.3% from $8,044.5 million for the same period in 2024[19] - Gross profit for the three months ended November 30, 2025, was $1,183.2 million, a decrease of 7.9% compared to $1,284.3 million in the same period of 2024[19] - Operating income for the nine months ended November 30, 2025, was $2,279.8 million, significantly higher than $505.2 million for the same period in 2024[19] - Net income attributable to Constellation Brands, Inc. for the nine months ended November 30, 2025, was $1,484.9 million, compared to $293.9 million in the same period of 2024, marking a substantial increase[19] - Comprehensive income attributable to Constellation Brands, Inc. for the nine months ended November 30, 2025, was $2,146.8 million, compared to a loss of $807.6 million in the same period of 2024[19] - For the nine months ended November 30, 2025, Constellation Brands reported a net income of $1,532.1 million, a significant increase from $339.5 million in the same period of 2024[25] - The company reported a net loss of $53.6 million for assets held for sale and related net assets for the nine months ended November 30, 2025[59] - Net income attributable to CBI decreased by $113.1 million, or 18%, to $502.8 million for the third quarter of 2026 compared to $615.9 million for the same quarter in 2025[189] Assets and Liabilities - Total assets increased to $21,683.4 million as of November 30, 2025, compared to $21,652.3 million as of February 28, 2025, reflecting a growth of 0.14%[16] - Cash and cash equivalents increased to $152.4 million as of November 30, 2025, from $68.1 million as of February 28, 2025[16] - Total current liabilities decreased to $2,173.2 million as of November 30, 2025, from $4,035.2 million as of February 28, 2025, indicating a reduction of 46.1%[16] - As of November 30, 2025, total stockholders' equity was reported at $8,071.7 million, reflecting changes in comprehensive income and share repurchases[22] - The fair value of long-term debt as of November 30, 2025, was estimated at $9,775.0 million, while the carrying amount was $10,289.1 million[54] - Total borrowings amount to $10,289.1 million as of November 30, 2025, with $374.7 million in short-term borrowings from commercial paper[75] Cash Flow and Investments - The company experienced total adjustments of $574.1 million, leading to net cash provided by operating activities of $2,106.2 million, compared to $2,557.5 million in the prior year[25] - Cash flows from investing activities showed a net cash provided of $230.1 million, contrasting with a net cash used of $1,098.2 million in the previous year[27] - The company issued long-term debt amounting to $997.7 million while making principal payments of $1,403.3 million during the nine months ended November 30, 2025[27] - The acquisition of Sea Smoke business was completed for $158.7 million, enhancing the company's portfolio in the luxury wine segment[30] - The 2025 Wine Divestitures generated cash proceeds of $845.9 million, resulting in a loss on sale of business of $31.0 million due to net assets sold of $874.1 million[31] Restructuring and Impairments - The company reported a goodwill impairment of $2,250.0 million in the previous year, which did not recur in the current reporting period[19] - The 2025 Restructuring Initiative is projected to incur cumulative pre-tax costs between $110 million and $130 million, with 50% allocated to employee termination costs and 50% to consulting services and other costs[35] - For the nine months ended November 30, 2025, pre-tax restructuring costs totaled $56.4 million, including $22.7 million for employee termination and $33.5 million for consulting services[36] - Cumulative restructuring costs as of November 30, 2025, reached $106.1 million, with employee termination costs accounting for 66% and consulting services for 34%[38] - A goodwill impairment of $2,250.0 million was recorded for the nine months ended November 30, 2024, due to negative trends in the Wine and Spirits business[62] Market Position and Strategy - The company is the second-largest beer company in the U.S. and the 1 beer brand in dollar sales is Modelo Especial, highlighting its strong market position[124] - The company aims to maintain its leadership position in the U.S. beer market while focusing on high-end imported beer brands and enhancing operational efficiencies[132] - The company has repositioned its Wine and Spirits segment to focus exclusively on higher-end brands to drive growth and improve margins[133] - The company is committed to consumer-led premiumization trends and is investing in digital supply chain planning and consumer insights[131] Tax and Regulatory Matters - The effective tax rate for the nine months ended November 30, 2025, was 24.4%, compared to a tax benefit of 30.7% for the same period in 2024[83] - The effective tax rate for the nine months ended November 30, 2024, did not approximate the federal statutory rate of 21% due to various tax benefits, including a net income tax benefit from the SVEDKA Divestiture[87] - The OB3 Act, signed into law on July 4, 2025, is expected to negatively impact the company's effective tax rate for Fiscal 2026, primarily due to changes in interest expense deductibility[90] - The company recognized a valuation allowance against its deferred tax asset related to prior year interest expense limitations for the nine months ended November 30, 2025[91] - The OECD's Pillar Two framework, which includes a 15% global minimum tax rate, is being monitored, but the company does not anticipate a material impact on its financial condition[92] Segment Performance - For the nine months ended November 30, 2025, net sales reached $7,218.8 million, with the Beer segment contributing $6,589.2 million and the Wine and Spirits segment contributing $629.6 million[109] - Comparable operating income for the Beer segment was $2,588.5 million, resulting in an operating margin of 39.3%[109] - The Wine and Spirits segment reported a comparable operating income of $7.9 million, with an operating margin of 1.3%[109] - Consolidated net sales decreased by 10% to $2,222.8 million in Q3 FY 2026 from $2,463.8 million in Q3 FY 2025[171] - Beer segment net sales declined by 1% to $2,009.7 million, primarily due to a $46.2 million decrease in shipment volume[171] - Wine and Spirits segment net sales fell by 51% to $213.1 million, driven by a $202.6 million impact from divestitures and a $15.7 million decrease in organic net sales[173] Cost and Expense Management - Selling, general, and administrative expenses as a percentage of net sales increased to 22.1% for the third quarter of 2026 from 19.9% for the third quarter of 2025[181] - Selling, general, and administrative expenses decreased by 1% to $1,427.9 million for Nine Months 2026, with Beer segment expenses increasing by 2% and Wine and Spirits segment expenses decreasing by 20%[198] - The company faced increased costs of product sold due to tariffs, foreign currency losses, and unfavorable fixed cost absorption, impacting overall profitability[174] - The company executed efficiency and cost optimization initiatives that resulted in over $40 million of net benefit for Q3 FY 2026[174]