Constellation Brands announced first-quarter fiscal 2026 results that fell short of analysts' expectations for both revenue and earnings, attributing the performance to weakening consumer demand and increased aluminum tariffs. Net sales declined 5.8% to $2.52 billion, missing the $2.55 billion forecast, while adjusted earnings per share were $3.22, below the $3.31 anticipated. The company's net income for the quarter was $516.1 million, or $2.90 per share, down significantly from $877 million, or $4.78 per share, in the prior year.
The decline in sales was largely driven by a 3.3% drop in beer shipment volumes, particularly impacting brands like Modelo Especial and Corona Extra, with Modelo Chelada also seeing decreases. Pacifico, however, registered growth of over 13%. Constellation's beer business, which accounts for approximately 80% of total revenue and includes Mexican imports, faced headwinds from higher duties on aluminum (raised to 25% in March and 50% in June) and tariffs on canned beer imports starting in April 2025. This contributed to a 150 basis point, or 1.5%, reduction in operating margin.
Despite the weaker-than-expected quarterly figures, Constellation Brands maintained its fiscal 2026 comparable earnings per share forecast of $12.60 to $12.90 and organic net sales guidance ranging from a 2% decline to a 1% increase. CEO Bill Newlands cited "non-structural socioeconomic factors" and overall consumer concerns about inflation and cost structures for the softer demand across all shopper segments, noting a decrease in social occasions and eating out. He clarified that while overall beer spending is down, its share of the total grocery bill has remained stable.
The company also reported that its wine and spirits net sales decreased by 28% due to a 30.4% decline in shipment volumes, primarily from the divestiture of Svedka vodka and weaker demand in mainstream U.S. wholesale markets. Constellation's stock initially fell less than 1% in after-hours trading but rose 3% the following morning after the conference call. The company has repurchased $381 million in shares and returned over $300 million to shareholders during the quarter, demonstrating confidence in its long-term financial health despite the current challenges.
Analysts from Wedbush noted the impact of a new CEO, brand investments, and margin pressures on the outlook for Constellation Brands, but the company's decision to reiterate its full-year guidance signals its belief in hitting financial targets. Challenges like aluminum tariffs and softer consumer sentiment, particularly among Hispanic consumers who account for roughly half of Constellation's beer sales, are key factors influencing performance, although leadership emphasized broader consumer inflation concerns.
