Constellation Brands revises earnings forecast amid tariff woes

Constellation Brands has become the first major drinks company to explicitly assess the potential impact of President Trump's tariffs on its operations. By quantifying the disruption, the company is shedding light on how these trade policies could affect its future performance and financial outlook. The post Constellation Brands revises earnings forecast amid tariff woes appeared first on The Drinks Business.

Apr 11, 2025 - 12:03

Constellation Brands revises earnings forecast amid tariff woes

Constellation Brands has become the first major drinks company to explicitly assess the potential impact of President Trump's tariffs on its operations. By quantifying the disruption, the company is shedding light on how these trade policies could affect its future performance and financial outlook. Constellation_Brands_headquarters

The company has trimmed its sales outlook for the next three years and announced plans to sell underperforming wine brands such as Cook’s, J. Rogét, Meiomi, Robert Mondavi Private Selection, SIMI and Woodbridge to The Wine Group for an undisclosed sum. However, despite speculation that it might pull out of wine completely, Constellation is retaining brands “predominantly priced US$15 and above”, such as Robert Mondavi Winery and Kim Crawford. For its fiscal year 2026, which has just begun, Constellation has cut its estimate of adjusted earnings per share to between $12.60 and $12.90, below the consensus of analysts’ forecasts. It has also slashed its enterprise net sales projection to between a decline of 2% and a 1% rise. Previously, it had expected an increase of between 2% and 4%.

Earnings forecast below expectations

It also trimmed its forecasts for 2027 and 2028 when it expects net sales growth of approximately 2% to 4%, with growth of between 2% and 4% in beers and flat to 3% growth in its remaining wines and spirits portfolio. Those reduced forecasts, Constellation said, reflect "the anticipated impact" of President Trump’s reciprocal tariffs announced on April 2 as well as those against Canada on March 4. The projections were made, however, before Trump halted tariff rises for 90 days. The changes came as Constellation revealed fourth-quarter adjusted earnings per share of $2.63 on net sales of $2.16 billion, ahead of analysts' estimates.

Beer sales stable

Beer net sales, largely of the premium Mexican Modelo and Corona brands, were virtually flat in the quarter at $1.70 billion, but wines and spirits sales rose 11% in comparison to last year to $459.8 million Gross profit increased 7% year over year to $1.11 billion. The company reported an operating loss of $150.3 million compared to an operating income of $629.4 million in the same quarter a year ago. Initially there had been fears that Constellation would be hard hit by Trump’s tariffs on Mexican products, but because beer is subject to the tripartite trade agreement between the USA, Canada and Mexico, the cost will go up by the blanket 10% to American drinkers unless Constellation and its distributors absorb any of the effects. Chief executive Bill Newlands said: "Looking ahead, in a tough socioeconomic environment, we are taking decisive actions designed to continue to support our industry-leading beer business, reset our cost base, and redefine our portfolio." Constellation’s shares have lost close to a third of their value in the past 12 months, but the company is seeking to boost shareholder value by raising its dividend by 1% and by launching a further share buyback programme.