Corona beer maker Constellation Brands' third-quarter sales fell short of market expectations, as demand for its higher-priced spirits and wines slowed down in the face of sticky inflation.
The Victor, New York-based company is seeing inflation-hit consumers pivot towards its affordable offerings and away from Constellation's premium products like Robert Mondavi, Svedka Vodka and Casa Noble Tequila.
Constellation, like its industry peers Molson Coors and Brown-Forman, had undertaken price hikes to navigate rising costs of production, which have now come off their peaks.
This helped the company post a quarterly comparable profit of $3.19, topping estimates of $3, according to LSEG data.
The Clos du Bois wine-maker's quarterly sales came in at $2.47 billion, compared with analysts' average estimate of $2.54 billion.
Quarterly Highlights
Organic net sales in its premium wines and spirits segment fell 7% in the quarter, and the company now expects the segment to see an annual drop of 7% to 9%, compared to prior expectations of a 0.5% fall.
Constellation's beer brands have benefited from customers increasingly preferring smaller pack sizes.
Chief financial officer, Garth Hankinson stated, "The continued strong performance of our beer portfolio in the third quarter has given us the confidence to raise our full-year operating income outlook for that business. In addition, we now expect higher enterprise operating cash flow and free cash flow in fiscal 2024."
It also picked up customers as conservative backlash over a social media promotion by rival Anheuser-Busch InBev's steered consumers away from Bud Light and Budweiser brands.
Net sales in the company's beer business, which includes Corona Premier and Modelo Especial, rose 4% in the quarter.
The company, however, maintained its fiscal 2024 comparable profit forecast of between $12.00 and $12.20 per share.
Constellation's shares were up marginally in volatile premarket trading.
News by Reuters, additional reporting by ESM.
