Constellation Brands is lining up an impairment loss of up to US$2.5bn from its wine and spirits divisions with sales declines from the combined businesses expected to continue.
In results from its financial first quarter to the end of May, reported in July, the group’s 6% rise in sales was offset by wine & spirits’ -7% showing. The performance represented a continuation of the downward trend for Constellation’s brands in the two beverage alcohol categories.
The “goodwill impairment”, which will impact the company’s bottom line, will be recognised in the results for the current quarter.
A redraw of the forecasts for fiscal 2025 – to the end of February next year – estimates a sales slide of between 4% and 6% for wine & spirits. The previous forecast had been for a flat performance. Meanwhile, beer sales, which occur exclusively in the US, should be up 6% to 8% rather than the earlier +7%-to+9% range. The reasons given for the revisions were “incremental macroeconomic headwinds” that include rising unemployment and the continuation of destocking activity in wine and spirits, particularly affecting Constellation’s mainstream and premium wine stable.
“While ongoing macroeconomic headwinds … have led to a recent deceleration in the rate of growth of consumer demand for our products, we are on track to deliver a solid mid single-digit volume increase this fiscal year for our beer business,” said CEO Bill Newlands.
“In our wine & spirits business, the commercial and operational execution initiatives introduced earlier this year are improving the performance of our largest brands, but we continue to face incremental category headwinds further affecting our outlook for this fiscal year.”
CFO Garth Hankinson added that Constellation is implementing “incremental tactical pricing and marketing actions to support demand for our core (wine and spirits) brands”.
The company owns Kim Crawford, Meiomi and The Prisoner Wine Co brands in wine and Casa Noble tequila, Svedka vodka and High West American whiskey on the spirits side.
