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Constellation forecasts profits above expectations
Constellation Brands is bucking the trend of global drinks groups that are moderating investor expectations for the rest of this year.
It has forecast annual profits above Wall Street’s predictions as sales of its core beer brands remain buoyant despite the consumer pattern of downtrading and resistance to price rises.
When announcing its positive annual results, Constellation said it expects annual comparable earnings per share for 2025 in the range of $13.50 to $13.80, compared with analysts’ average estimates of $13.42 per share.
Increase
Net sales for the year were US$9.962 million, a 5% increase on the 2023 outcome, but through price rises and operating efficiencies net income rose by 12%.
The company posted net sales of $2.14 billion for the fourth quarter to the end of February compared with analysts’ average estimate of $2.10 billion,
In the quarter Constellation’s beer sales through retailers grew by 8.9% compared with 6% in the same period last year last year.
Chief executive Bill Newlands said the “beer business continued its strong growth momentum,” and that it achieved “its fifty-sixth consecutive quarter of volume growth.”
Modelo
That was led in part by its “industry-leading beer brands,” such as Modelo Especial, he said.
“We achieved a significant milestone this year, as Modelo Especial became the number one beer in U.S. dollar sales.”
The Mexican beer brand grew depletions by nearly 14% during the fourth quarter.
Meanwhile, the Pacifico brand enjoyed 22% of depletion growth and operating margin in the beer business rose by 30 basis points to 34.4%.
The company believes that its beer sales will increase by up to a further 10% in the current financial year, reflecting not only its brand strengths but also the US consumer’s shift away from wines and spirits towards beer.
Despite direct-to-consumer sales growing by 10%, the wines and spirits division fared less well with quarterly sales falling by 6% as wholesalers trimmed orders for high-priced premium brands.
Challenging
That was the result of “challenging marketplace dynamics,” which continued to pressure sales volumes, Newlands said.
Nevertheless, he predicted that the wines and spirits arm would improve its net sales performance this year.
In a TV interview he told CNBC: “We’re going to put a lot more focus on the critical brands, brands like The Prisoner and Meiomi and High West and Mi Campo, as examples.
“We’re also going to make sure that we focus our attention on execution. I think we spread ourselves a little too thin in the past year.”
He said Constellation is “seeing success and growth in its Pacifico brand, “which is very popular in California, but it’s also starting to grow on the East Coast, including the “beach markets” in Florida and New Jersey.
“We’re very excited about the long-term potential for Pacifico”, he said.
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