Constellation Brands(STZ) - 2025 FY - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company has lowered its fiscal 2026 guidance, expecting enterprise top line growth to decline by 4% to 6% and beer business to decline by 2% to 4% [7][10] - Operating income expectations have also been adjusted, with enterprise expected to decline by 9% to 11% and beer business by 7% to 9% [8][10] - Comparable EPS is now projected to be in the range of $1.130 to $1.160 [10] Business Line Data and Key Metrics Changes - The beer volume decline is impacting overhead absorption and operational efficiencies, contributing to a 100 basis point headwind to overall margin for the beer business [8][10] - The company has gained share in 49 of the 50 states, with distribution gains up in the mid-single digits [3][4] Market Data and Key Metrics Changes - The Hispanic consumer segment is facing significant socioeconomic concerns, with 80% worried about socioeconomic factors and 75% about personal finances, leading to reduced shopping occasions [3][25] - The overall beer category is experiencing a decline, with scanner data down 4.5% year to date [12] Company Strategy and Development Direction - The company is focusing on controlling the controllables, such as execution and distribution, while continuing to invest in the category [18] - Innovation is seen as a core competency, with products like Corona Sunbrew performing well and attracting new consumers [26][32] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the challenging consumer environment and the volatility in the marketplace, particularly affecting Hispanic consumers [2][6] - There is a belief that as the socioeconomic environment normalizes, the beer category will also return to more typical growth patterns [13][16] Other Important Information - The company has returned approximately $600 million to shareholders through share repurchases in the first half of the fiscal year [10] - The impact of new tariffs is expected to be around $70 million for the beer business and $20 million for the wine business, totaling $90 million across the enterprise for the full fiscal year [10] Q&A Session Summary Question: How confident is the company in the medium-term growth outlook for the beer category? - Management believes that the beer category will eventually return to a normalized growth profile, supported by increased loyalty among Hispanic consumers and Gen Z [12][13] Question: What has changed from previous guidance to the current outlook? - The company has seen declining buy rates in key states, particularly those with a high Hispanic population, leading to a more cautious outlook [15][16] Question: How is the company addressing brand equity while competing on price? - The company is strategically adjusting prices for brands like Oro and Premier to remain competitive while maintaining strong brand health and equity [38][44] Question: What is the company's approach to innovation in the beer segment? - Innovation is critical, with successful products like Corona Sunbrew and non-alcoholic options driving interest and new consumer engagement [26][32] Question: How is the wine business performing amid industry challenges? - The wine business has shown positive performance, with brands like Ruffino and Kim Crawford outperforming the category [54][55]