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Constellation wines and spirits sales take hit in Q3
Constellation Brands saw its net sales for wines and spirits drop by more than 10% in the third quarter of 2017/18, at the same time as announcing a US$3 billion share repurchase programme.
High West Whiskey was a strong performer for Constellation in Q3
In the three months to 30 November 2017, the US drinks producer saw its net sales for the wine and spirits category fall 10.3%, from US$845m to US$759m
The firm’s acquired brands – including The Prisoner, Meiomi, and Charles Smith wine brands, and High West Whiskey – delivered “exceptional“ depletion growth, with High West Whiskey up by 28%.
Constellation Brands also recently acquired a minority stake in Canadian cannabis maker Canopy Growth Corporation for C$245m (US$191m).
“It’s been a dynamic time for our business. In 2017, Constellation was one of the best performers among S&P 500 Consumer Staples stocks driven by the overall strength of our results and the ongoing growth prospects for our business,” said Rob Sands, president and CEO.
“We recently established a first mover advantage in an emerging consumer category with our investment in Canopy Growth. We continue to make smart investments with the planned addition of a fifth furnace at our glass production plant in Nava.”
Sands also said Constellation is “pleased” by the new tax reform legislation in the US, which will provide significant tax breaks for the alcoholic drinks industry.
Excluding the impact of the Canadian wine business divestiture, the wine and spirits business is targeting net sales growth between 4% to 6% for fiscal 2018, “driven primarily by mix benefits”.
The company said that it now expects results will be at the lower end of the forecast.
David Klein, executive vice president and chief financial officer, added: “Our new, multi-year US$3 billion share repurchase program, along with more than US$200 million in share repurchases this quarter, demonstrates our confidence in our future growth prospects.
“We have significant capital allocation flexibility to invest in our business and return cash to shareholders, while remaining committed to our leverage target.”