Constellation Brands reports Q1 2018 results
Company reports net sales growth of 3 percent
Constellation Brands Inc., Victor, N.Y., reported its first quarter fiscal 2018 results.
“We’re off to a great start for our new fiscal year as we continue to deliver excellent results that demonstrate our commitment to sustain profitable growth and build shareholder value,” said Rob Sands, president and chief executive officer of Constellation Brands, in a statement. “Across the business, we’re driving consumer demand for our exceptional portfolio of premium products while executing strong financial and operational performance.”
In the first quarter, the company reported consolidated net sales growth of 3 percent. This reflects organic net sales growth of 7 percent, partially offset by the net impact of the Canadian wine business divestiture less acquisition benefits, the company says.
In December 2016, Constellation completed the sale of its Canadian wine business to Ontario Teachers’ Pension Plan. For the first quarter of fiscal 2017, net sales and operating income that are no longer a part of the wine and spirits segment after the sale totaled $90 million and $10 million, respectively. For fiscal 2017, through the date of divestiture, net sales and operating income for the divested business totaled
$311 million and $50 million, respectively, it adds.
For the quarter, the beer division’s net sales increased 8 percent, primarily driven by volume growth and favorable pricing, it says.
“The first quarter results for our beer business are a testament to the ongoing growth opportunities we have for our iconic portfolio of brands, which posted depletions of almost 12 percent for the quarter,” Sands said. “Excellent execution during the Cinco de Mayo and Memorial Day holidays led to significant share gains, as Constellation remains the No. 1 growth driver in the high-end of the U.S. beer market. In addition, our new Corona Premier and Familiar products are delivering strong performance in test markets and they are well ahead of our expectations.”
Wine and spirit sales decreased 4 percent. This reflects a 6 percent increase in organic net sales primarily driven by benefits from mix, price and volume growth, which was more than offset by the net impact of the Canadian wine business divestiture less acquisition benefits. U.S. shipment volume outpaced depletion volume for the quarter, primarily due to timing, it adds.
“Our wine and spirits business delivered significant margin improvement in the first quarter, while depletion trends were impacted by the timing of promotional activities,” Sands said. “However, we have solid programming in place to drive growth for our key brands throughout the remainder of the year. In addition, our spirits business posted double-digit sales growth driven by the success of our High West Whiskey portfolio, as well as Svedka Vodka and Paul Masson Brandy.”
Consolidated reported and comparable-basis operating income increased 3 percent and 22 percent, respectively, the company says.
For fiscal 2018, the company expects the beer business to continue to target net sales growth in the range of 9 to 11 percent, and operating income growth is targeted in the range of 13 to 15 percent, it says.
For the wine and spirits business, the company continues to expect net sales to decrease 4 to 6 percent and operating income to be flat. These projections include the estimated impact of the divestiture of the Canadian wine business and the estimated incremental benefits from High West, Charles Smith and Prisoner acquisitions.
The company also purchased Schrader Cellars in June. The Schrader Cabernet Sauvignon portfolio has become part of Constellation’s fine wine portfolio under its newly established fine wine organization, the company says.
Excluding the $311 million of net sales and $50 million of operating income from the fiscal 2017 wine and spirits segment results related to the Canadian wine business divestiture, the company expects net sales growth of 4 to 6 percent and operating income growth of 5 to 7 percent for fiscal 2018, it says. BI