Booze giant Constellation Brands warns of $2.5B writedown on weak wine demand

Core Viewpoint - Constellation Brands is facing significant challenges due to weak wine demand, leading to a potential asset write-down of up to $2.5 billion and a drastic reduction in earnings outlook for the year [1][2]. Financial Outlook - The company has nearly halved its earnings outlook to a range of $3.05 to $7.92 per share, down from initial expectations of $14.63 to $14.93 per share [2]. - Total sales outlook has been revised down to between 4% and 6%, from a previous estimate of 6% to 7% [2]. Market Conditions - CEO Bill Newlands highlighted ongoing macroeconomic headwinds, particularly rising unemployment, as factors contributing to a slowdown in consumer demand for products [3][6]. - A sales decline of 4% to 6% is expected in the wine and spirits division, contrasting with earlier expectations of flat sales [3]. Strategic Adjustments - The company plans to adjust pricing and enhance marketing efforts to mitigate sales challenges in the wine and spirits sector [4]. - Despite the struggles in the wine division, Constellation anticipates a sales growth of 6% to 8% in its beer division [4]. Sales Performance - The demand drop has been particularly pronounced in the top five states for the beer business, which account for over half of Constellation's total sales volumes [7]. - The company had previously raised its profit outlook in July due to improved margins and strong beer sales [7]. Stock Performance - On the day of the announcement, Constellation shares rose by 2%, and the stock has increased by 0.7% year-to-date [8]. - The company has a market capitalization of $44.99 billion [8].