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What’s Constellation Brands’ Fiscal 2020 Sales Outlook?

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Q4 and fiscal 2019 sales

Constellation Brands (STZ) generated sales of $1.80 billion in the fourth quarter of fiscal 2019 and exceeded analysts’ expectation of $1.74 billion. The company’s top line grew 2.0% on a year-over-year basis in the fourth quarter mainly due to the 9.3% increase in the Beer segment sales to $1.1 billion. Constellation Brands’ Beer segment sales were driven by favorable pricing and higher volumes, reflecting continued demand for the Modelo and Corona brands. In contrast, sales of the Wine and Spirits segment fell 7.6% to $707.1 million due to a 9% decline in shipment volumes. Constellation Brands’ sales increased 7.1% to $8.12 billion in fiscal 2019, reflecting strong demand for its Mexican beer portfolio.

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Sales of the company’s Beer segment grew 11.6% to $5.20 billion in fiscal 2019 driven by a 9.7% rise in shipment volume and favorable pricing. Wine and Spirits segment sales declined 0.2% to $2.91 billion in fiscal 2019 as a 0.8% fall in shipment volume was offset by slightly favorable pricing.

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Fiscal 2020 outlook

Constellation Brands anticipates its Beer segment net sales and operating income to rise in the range of 7% to 9% in fiscal 2020. This growth rate indicates a deceleration compared to the low-double-digit growth generated in fiscal 2019. The company drove 40% of the growth in the high-end category of the US beer market in fiscal 2019. Constellation Brands projects continued growth in Corona (especially Corona Premier and Corona Familiar) and Modelo brands.

Constellation Brands intends to complete the divestiture of 30 wine and spirits brands to E & J Gallo Winery by the first quarter of fiscal 2020. The company expects net sales of its remaining Wine and Spirits portfolio to decline in the range of 25% to 30% and operating income to fall by 30% to 35% in the current fiscal year.

The remaining Wine and Spirits segment comprises higher-margin brands like Kim Crawford, Meiomi, and SVEDKA Vodka that are priced above $11.

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