Constellation Brands (NYSE: STZ) reported a challenging start to fiscal 2026, with Q1 net sales falling 6% year-over-year to $2.515 billion and net income plunging 41% to $516 million.
Diluted EPS dropped to $2.90, down 39% from the prior year, while operating income declined 24% to $714 million.
Revenue missed analysts’ estimates as aluminum tariffs dented its profitability.
Despite these declines, the company returned over $300 million to shareholders via share repurchases.
It maintained its full-year EPS guidance of $12.60–$12.90. CEO Bill Newlands attributed the softness to “non-structural socioeconomic factors” but reaffirmed confidence in the company’s long-term strategy.
"While we continued to face softer consumer demand largely driven by what we believe to be non-structural socioeconomic factors, our teams remain focused on executing the key initiatives that underpinned the outlook we recently provided for fiscals 2026 to 2028. Against that backdrop, we are pleased to continue to lead the U.S. Beer industry in dollar share gains, to have fully repositioned our Wine and Spirits portfolio in higher-growth and highermargin segments, and to consistently deliver against our capital allocation priorities," said Bill Newlands, President and Chief Executive Officer.
Beer Business Holds the Line, Modelo Leads the Pack
The beer segment remains a relative bright spot, outperforming the broader beverage alcohol category.
While net sales dipped 2% and shipment volumes fell 3.3%, the segment gained over two percentage points in terms of U.S. tracked sales.
Modelo Especial retained its crown as the top-selling beer in the U.S., bolstered by strategic marketing and premiumisation efforts.
However, operating margins narrowed by 150 basis points to 39.1%, pressured by aluminum tariffs and higher input costs.
Wine & Spirits Refocuses on Premium, But Takes a Hit
Following the divestiture of mainstream brands into The Wine Group, Constellation’s wine and spirits business is now centered on high-end labels like The Prisoner, Kim Crawford, and High West Whiskey.
Yet the transition came at a cost: net sales in the segment dropped 28%, with shipment volumes down 30.4% and an operating margin swing from +15.3% to -2.1%.
The company expects organic net sales in this segment to decline 17–20% for the full year, though the remaining brands posted 2% depletion growth, signaling traction in the premium tier.
ESG, Capital Discipline, and Leadership Moves
Constellation reaffirmed its commitment to ESG, publishing its 2025 Impact Report in June.
This report outlines goals for water stewardship, community investment, and responsible consumption.
The company also announced a leadership transition in investor relations, with Blair Veenema taking over from Joseph Suarez, who moved to SVP of Finance for Wine & Spirits.
Free cash flow rose 41% to $444 million in Q1. The company reiterated its FY2026 free cash flow guidance of $1.5–$1.6 billion, with a targeted net leverage ratio of ~3.0x and a 30% dividend payout ratio.
"Our cash flow generation enabled us to remain at our ~3.0x comparable net leverage and ~30% dividend payout ratio targets, while continuing to advance our modular brewery investments and returning over $300 million to shareholders in share repurchases in the first quarter of fiscal 2026. As we look to the remainder of the year, our annual operating cash flow and free cash flow expectations are unchanged, and we remain committed to deploying that cash in-line with our balanced and consistent capital allocation priorities," said Garth Hankinson, Executive Vice President and Chief Financial Officer.
At the time of writing, the Constellation Brands (NYSE: STZ) share price was $165.73 in after-hours trading; down 69 cents (0.41%). At the close it was $166.42, which was up $3.74 (2.30%). It has a market cap of around $29.44 billion.
* All financials are in U.S. dollars.
