Top line fell
Unlike the strong Beer segment sales, Constellation Brands’ (STZ) Wine and Spirits segment sales fell in fiscal 1Q18, which ended on May 31, 2017. The company’s Wine and Spirits segment sales fell 3.8% to $693.2 million in fiscal 1Q18. The Wine and Spirits segment accounted for 36% of the company’s fiscal 1Q18 net sales.
What dragged 1Q sales?
The sales of Constellation Brands’ Wine and Spirits segment fell in fiscal 1Q18 due to a 5.9% fall in the company’s wine sales to $605 million. This fall was partially offset by a 13.5% growth in the spirits’ sales to $88.2 million. The wine business was adversely impacted by the divestiture of the Canadian wine business. The company divested this business to focus on higher-margin, premium wine brands.
The segment continued to witness a strong performance from its acquired brands including High West Whiskey, The Prisoner, and Charles Smith Wines.
Strong operating income
Despite lower sales, the Wine and Spirits segment’s operating income rose 22.4% to $205.6 million in fiscal 1Q18. This impressive growth was a result of favorable mix and pricing, benefits from strategic acquisitions, and higher volumes.
For the wine and spirits business, Constellation Brands continues to expect net sales to fall by 4% to 6% in fiscal 2018. The segment’s operating income is expected to be flat in fiscal 2018.
We’ll look at the company’s first quarter margins in the next part of this series.