Constellation’s wine and spirits sales fall by 10.3% in Q3

The value of Constellation Brand’s shares have been shaken following the release of its third quarter results, with net sales of wine and spirits falling by 10.3% to $759 million, compared with the same period last year.

Rob Sands, CEO of Constellation Brands

The slump in sales was blamed on a number of natural disasters hampering sales, including hurricanes in Florida and Texas, wildfires in California, but also the divestiture of the company’s Canadian wine business in December 2016. The results caused shares in the company to dip by 3.9% on Friday.

The company said it now expects sales of wine and spirits, which include Robert Mondavi wines and Svedka Vodka, to be at the lower end of a prior forecast that had predicted a decline of 4-6% for the full-year.

In comparison, sales of beer were positive with net sales increasing by 7.8% to reach just over $1 billion for the quarter, which was attributed in part to strong sales over Labor Day and Thanksgiving. Leading brands highlighted as Corona Extra and Modelo Especial.

Overall, Constellation’s net sales fell marginally, by 1%, to $1.80 billion, missing analysts’ estimates of $1.87 billion. Earning before interest and taxes (EBIT) increased by 4% to $582m.

The results come two months after Constellation acquired a 10% stake in said in Canada’s biggest cannabis producer Canopy Growth Corp for £141m, becoming the first major beer and spirits company to invest in legal cannabis.

“It’s been a dynamic time for our business,” said Constellation’s CEO and president Rob Sands. “In 2017, Constellation was one of the best performers among S&P 500 Consumer Staples stocks driven by the overall strength of our results and the ongoing growth prospects for our business. We recently established a first mover advantage in an emerging consumer category with our investment in Canopy Growth.

“We continue to make smart investments with the planned addition of a fifth furnace at our glass production plant in Nava. And, we are pleased with the outcome of tax reform legislation that allows U.S. companies to remain competitive globally and we believe it will be positive for Constellation going forward.”

The company also announced a $3 billion share buyback program and raised in its full-year profit forecast.

“Our new, multi-year $3 billion share repurchase program, along with more than $200 million in share repurchases this quarter, demonstrates our confidence in our future growth prospects,” said David Klein, Constellation’s executive vice president and chief financial officer.

“We have significant capital allocation flexibility to invest in our business and return cash to shareholders, while remaining committed to our leverage target.”