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Constellation Brands reported higher sales and adjusted earnings for its fiscal second quarter on October 6, as growth in shipments and gains across several beer and wine brands helped offset a slight decline in U.S. beer depletions. The company, whose portfolio includes Corona, Modelo and Pacifico, posted net sales of $2.63 billion for the three months ended August 31, up 6% from a year earlier.
Comparable earnings per share, a company-defined measure that excludes specified items, increased 3% to $3.74. Reported earnings per share were $3.32, up 25%, while reported operating income fell 8% to $805 million. The company’s release also noted that comparable figures are non-GAAP measures, so they should be distinguished from results calculated under standard accounting rules.
Beer sales grew even as depletions edged down
The beer division generated $2.47 billion in net sales, up 5% year over year, as shipments increased 5.5%. Depletions—a measure of products sold by distributors to retailers—declined 0.6%. The difference between shipments and depletions is relevant: shipment growth did not translate into higher reported consumer-level sales across the tracked channels during the quarter.
Within the portfolio, declines in depletions for Modelo Especial, down about 2%, and Corona Extra, down about 5%, were partly offset by growth in Pacifico, Victoria and Modelo Chelada brands. The company reported increases of about 19% for Pacifico, 15% for Victoria and 5% for Modelo Cheladas. It said an extra selling day was largely offset by the timing of the Labor Day holiday, with minimal impact on underlying depletion trends.
Constellation said its beer business led dollar and volume share gains in Circana-tracked U.S. channels, outperforming the overall beer category by four percentage points in year-over-year dollar and volume sales. The company’s figures also showed varying results by brand: Modelo Especial remained the top beer brand by dollar sales, while Pacifico and Victoria ranked among the largest dollar-share gainers. Those rankings are based on the company’s cited tracked-channel data, not the entire U.S. market.
Wine and spirits added to quarterly growth
The Wine and Spirits business reported sales of $159.4 million, a 17% increase, and depletions rose 10.2%. Shipment volume increased 15.4%. Constellation attributed depletion growth in part to Kim Crawford and Mi CAMPO, whose volumes rose about 11% and 51%, respectively.
Operating performance also improved in the division: it recorded operating income of $6.1 million, compared with a loss of $19.8 million in the year-earlier quarter. The company cited tariff recoveries and lower marketing and other selling, general and administrative costs tied to optimization and restructuring efforts. The division’s year-over-year results should be viewed against Constellation’s previous divestitures: its fiscal-year outlook excludes $142 million of sales from businesses no longer included in the comparison period.
Across its tracked channels, Constellation said its wine and spirits portfolio outpaced the category in dollar and volume sales, and its wine portfolio ranked third among dollar-share gainers in the total wine category. Those results helped broaden the quarter’s growth beyond beer, though beer remained the much larger business by sales.
Full-year comparable earnings outlook reaffirmed
Constellation raised its fiscal 2027 reported earnings-per-share outlook to a range of $11.85 to $12.55. It reaffirmed its comparable EPS forecast of $11.20 to $11.90, along with targets for operating cash flow of $2.4 billion to $2.5 billion and free cash flow of $1.6 billion to $1.7 billion.
The company’s assumptions include a range from a 1% decline to 1% growth in enterprise organic net sales, with the same range for beer and wine and spirits. It expects a comparable operating margin of 32% to 33% for the enterprise. Management’s guidance is a forecast, not a reported result, and the company cautioned that actual outcomes could differ.
Capital returns and acquisition activity
Constellation reported $1.5 billion in operating cash flow and $1.1 billion in free cash flow for the first half of fiscal 2027. It said it had repurchased $530 million of shares year to date through September and returned more than $800 million to shareholders through buybacks and dividends during the half-year. The board declared a quarterly dividend of $1.03 per Class A share, payable November 13 to holders of record on October 30.
After the quarter ended, the company completed its acquisition of SpikedAde, a spirit-based ready-to-drink brand. The transaction included $75 million paid at closing for full ownership, plus up to $278 million in additional contingent payments over five years tied to the brand’s future performance. Constellation said the acquisition does not change its fiscal 2027 outlook.
Chief Executive Nicholas Fink said the company had increased investment and was seeing early returns in share gains across beer and wine and spirits compared with the first quarter. Chief Financial Officer Garth Hankinson said cash generation supported shareholder returns and brand investment while the company maintained its target comparable net leverage ratio of about 3.0 times. The executives were scheduled to discuss the results and outlook on a conference call on October 7.
