USA: Constellation Brands sees shares fall as supply chain costs offset beer sales growth

Shares of Constellation Brands fell on January 5 after the wine, beer and spirits company reported ongoing supply chain costs that offset sales growth in its beer category.

The stock was down about 9% by January 5 afternoon.

The company, which makes Corona beer and Svedka vodka, also lowered its earnings outlook for the fiscal year. Constellation said it now projects earnings of $11 to $11.20 per share for the year, down from its previous guidance of $11.20 to $11.60 per share.

For the three months ended Nov. 30, Constellation’s beer segment posted year-over-year net sales growth of 8%, driven by continued growth of its Modelo Especial and Modelo Chelada brands.

However, the company cited higher costs from raw materials, packaging and logistics, brewery expansions and marketing, which offset beer sales growth.

In a conference call with analysts on January 3, Chief Executive Officer Bill Newlands added that a “recent series of headwinds” hit the company’s beer business towards the end of its fiscal third quarter, including poor weather and economic conditions in California.

Its operating margin in the beer business decreased during the quarter to 37.5% from 41.3% a year earlier.

The company said it plans to continue price increases on its beer products to match higher operating costs plaguing its supply chain.

For its third quarter, Constellation’s over net income fell to $467.7 million, or $2.52 a share, from $470.8 million, or $2.48 a share, from a year ago.

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