The shares of Constellation Brands ($STZ (+1,4%) ) fell sharply in early US trading on Tuesday. At their peak, they lost around eight percent after the spirits and brewery group slashed its forecasts for the current financial year.
Instead of the previous forecast of earnings per share of 12.60 to 12.90 dollars, the management now expects only 11.30 to 11.60 dollars. This also falls short of analysts' expectations of an average of 12.66 dollars. In terms of organic net sales, Constellation no longer anticipates a range between a slight decline and growth, but rather a minus of four to six percent.
In particular, the beer business with the Corona and Modelo flagships is expected to be weaker than previously hoped. Sales are expected to be two to four percent below the previous year - the Group had previously forecast growth of up to three percent. The operating result is also expected to fall by up to nine percent.
The company cited a difficult economic environment as the reason, which is dampening consumer confidence. The demand for high-priced beers has recently declined noticeably, explained company boss Bill Newlands. Especially in the Hispanic customer group, which is important for Constellation, the decline was more pronounced than in the market as a whole.
The forecast for free cash flow has also been cut: instead of 1.5 to 1.6 billion dollars, it is now expected to be 1.3 to 1.4 billion. In the second quarter, Constellation is also expecting an early inventory adjustment at dealer level, meaning that deliveries could initially lag behind actual sales.
Despite the weaker outlook, the Group emphasized that it had gained market share in 49 out of 50 US states by July. In the American beer market, the company continues to be the biggest winner in terms of sales share.
