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Constellation Brands, Inc. STZ has seen its shares slide 9.1% in the past month. STZ’s downside was more pronounced after it reported soft third-quarter fiscal 2025 results on Jan. 10, where the company missed revenue and earnings expectations. The company’s share performance contrasts with the broader industry’s decline of 0.8%, the Consumer Staples sector’s rise of 3.1% and the S&P 500’s growth of 3.2% in the same period.
STZ Stock's Past One Month Performance
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Constellation Brands' third-quarter fiscal 2025 results showed a 0.4% year-over-year decline in revenues, largely due to continued weakness in its wine and spirits business. Sales in this segment fell 14%, following a 12% decline in the prior quarter. The downside was primarily attributed to soft consumer demand and retailer inventory destocking in the U.S. wholesale market, particularly in the lower-priced wine category.
Key contributors to the decline in the wine and spirits business included a 16.4% drop in shipment volumes and a 4.3% decrease in depletions, reflecting ongoing demand challenges and inventory management. Constellation Brands emphasized that weakness in the wine category, especially in the lower price segments, remains a significant headwind.
Operating income for the wine and spirits segment fell 25% year over year, with the segment's operating margin declining 333 bps as sales declines outpaced reductions in the cost of goods sold and SG&A expenses.
Other Factors Behind Constellation Brands Stock Decline
Constellation Brands continues to face inflationary pressures, leading to higher packaging and raw material costs, while increased depreciation and operating expenses from brewery capacity expansions have further weighed on profitability. The beer segment's operating margin declined 60 basis points (bps) in the fiscal third quarter impacted by higher marketing spend and elevated depreciation costs, partially offset by favorable pricing.
The company has been witnessing a challenging operating backdrop, including the ongoing consumer dynamics. The subdued overall spending and prolonged value-seeking behavior in consumers might affect the company’s demand. Also, the macro shifts, mainly any change from potential tariff policies, might act as deterrents.
As a result, the company now envisions a comparable EPS of $13.40-$13.80 for fiscal 2025 compared with the earlier estimate of $13.60-$13.80. STZ anticipates enterprise operating income on a reported basis to decline 62-65% for fiscal 2025.
Constellation Brands’ fiscal 2025 outlook reflects mixed performance expectations across its segments. The company forecasts enterprise net sales growth of 2-5% with 4-7% sales growth for the beer segment. However, sales for the wine and spirits segment are expected to decline 5-8%. The company expects operating income to improve 9-12% for the beer segment and decline 17-19% for the wine and spirits segment. Corporate expenses are expected to be $250 million and net interest expenses are predicted to be $410 million for fiscal 2025.