Constellation Brands has revised its annual sales forecast downward after its fiscal third-quarter results fell short of Wall Street's expectations, resulting in a significant drop in the company's stock prices. The company, renowned for its flagship brands, including Modelo and Corona, now anticipates that its organic net sales for fiscal 2025 will grow between 2% and 5%.
This revised outlook marks a decrease from its previous expectation of 4% to 6% growth. The adjusted earnings are now forecasted to be between $13.40 and $13.80, with the lower end of the range being adjusted downwards from $13.60, while analysts surveyed by FactSet had projected earnings of $13.73. Chief Executive Officer Bill Newlands stated during an earnings conference call that "subdued overall spending and prolonged value-seeking behavior among consumers have been key near-term limiting factors on demand growth." He noted that these issues have not only affected Constellation's portfolio but also the overall dollar sales growth rate for the beverage alcohol industry.
Newlands expressed uncertainty regarding whether consumer spending would revert to more normalized patterns in the current quarter. As a result of these developments, Constellation's shares plummeted by nearly 17% during Friday afternoon trading. For the full fiscal year, the company now estimates that revenue growth in the beer segment will be between 4% and 7%.
This is a revision from its earlier forecast, which indicated an expected increase of 6% to 8%. Newlands informed analysts that the company is struggling with "softer" consumer demand as a result of various macroeconomic pressures. He emphasized that the company is actively seeking strategies to navigate the competitive landscape in the high-end light beer market, as well as pursuing distribution opportunities for its coladas. Meanwhile, Constellation's wine and spirits division is expected to see sales decline by 5% to 8%, a notable shift from its previous prediction of a 4% to 6% dip.
This decline is attributed to demand headwinds in the wine category, particularly in lower price segments, according to Newlands. Last month, Constellation made headlines by agreeing to sell its Svedka brand to Sazerac. Newlands confirmed that this deal has now been finalized. For the quarter ending November 30, Constellation reported net sales of $2.46 billion, a slight decrease from the $2.47 billion reported in the same period a year prior.
This result fell short of analysts' expectations, who were looking for $2.53 billion. Adjusted earnings per share rose to $3.25, compared to $3.24 the previous year; however, this also fell below the anticipated $3.31. In terms of revenue, the wine and spirits segment suffered a 14% decrease, totaling $431.4 million as shipment volumes experienced a 16% slump.
On a brighter note, beer sales increased by 3% to $2.03 billion, which was bolstered by a 1.6% rise in shipment volumes. The depletion rate for the beer division, indicating the speed at which units are sold to end consumers, rose by 3.2%. Looking ahead, Constellation has postponed the completion and planned startup of its newest brewery expansion in Mexico to fiscal 2026, revising its earlier deadline from the end of fiscal 2025.
The company announced that it expects initial production at its third brewery location in Veracruz, Mexico, to begin in late fiscal 2026 or early fiscal 2027..