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Assessing Constellation Brands’ Q3 Sales Growth

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Jan. 10 2019, Published 3:10 p.m. ET

Beer sales were a driving force

Constellation Brands (STZ) exceeded analysts’ sales expectation for the fourth consecutive quarter in the third quarter of fiscal 2019. The company’s sales for the quarter grew 9.6% to $1.97 billion and exceeded analysts’ expectation of $1.91 billion.

The strong performance of the company’s beer business drove its fiscal 2019 third-quarter sales growth. However, weakness in its wine and spirits business was a drag on its top line in the period.

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Wine and spirits sales disappoint

Net sales of Constellation Brands’ wine and spirits business grew by a modest 0.4% to $762.8 million in the quarter. The unfavorable impact of its product mix offset the $10 million positive impact of higher pricing. The company experienced softness in US depletions, reflecting distributor shipments to retail customers, in the quarter. Constellation Brands doesn’t expect any improvement in US depletion trends in the fourth quarter of fiscal 2019, so it’s lowered its fiscal 2019 guidance for the business.

Constellation Brands expects the sales and operating income of its wine and spirits business to fall in the low single digits in fiscal 2019. The company previously expected the business’s net sales and operating income to rise in the 2%–4% range in the year.

Constellation Brands aims to improve the performance of its wine and spirits business by focusing on high-end brands. In the next article, we’ll discuss the performance of the company’s beer business.

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