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    Constellation Brands Inc (STZ)

    Q4 2024 Earnings Summary

    Reported on Jan 10, 2025 (Before Market Open)
    Pre-Earnings Price$264.92Last close (Apr 10, 2024)
    Post-Earnings Price$271.00Open (Apr 11, 2024)
    Price Change
    $6.08(+2.30%)
    • Constellation Brands achieved the largest market share gain in its history, adding 2 points in total beer and 2.6 points in the high-end segment, demonstrating its strong position in the growing high-end beer category.
    • The company secured low double-digit growth in shelf space during spring resets, and with brands averaging over $50 million per SKU in dollar return, it is well-positioned for future growth.
    • Constellation Brands continues to be recognized as the #1 growth company among large CPG companies by Circana in 5 of the last 7 years, reflecting consistent best-in-class performance and strong execution.
    • Constellation Brands expects operating income in its Wine and Spirits business to decline by 9% to 11% in fiscal 2025, due to ongoing category headwinds and increased investments in marketing and sales, potentially impacting overall profitability.
    • Operating margins in the beer segment decreased by 40 basis points, with an absolute 12% increase in cost of goods sold (COGS), including a 16% increase in raw materials and packaging costs and a 19% increase in labor and overhead, indicating margin pressures from rising costs.
    • Interest expense increased by 9% to $435 million in fiscal 2024, driven by higher average borrowings and weighted average interest rates, which may affect future earnings.
    1. Beer Volume Growth

      Q: How strong is beer momentum moving forward?

      A: Beer depletions grew nearly 7% in the quarter, excluding the extra day. March performance was strong and consistent with expectations, setting up a solid year ahead. We achieved low double-digit growth in shelf space this spring, exceeding our growth algorithm.

    2. Margin Expansion

      Q: What's driving commodity inflation and margin outlook?

      A: Commodity prices, while down from peaks, remain above historical norms, with some not declining as hoped. We face headwinds like a strong peso but are hedged at 80%. We expect significant margin expansion in FY '25 as we progress toward our midterm margin goals.

    3. Market Share Shifts

      Q: How will cycling last year's Bud Light issue affect you?

      A: We weren't the biggest beneficiary of the Bud Light controversy. Our strong brand loyalty and focus on the high end position us well. We achieved unprecedented share gains of 2 points in total beer and 2.6 points in the high end—the largest in our history.

    4. Wine and Spirits Reset

      Q: Confidence in flat Wine and Spirits revenue amid past guide downs?

      A: We're enhancing execution with new leadership. Priorities include strengthening distributor alignment and focusing on 11 critical brands. We're also targeting efficiencies similar to successes in beer.

    5. Shelf Space Gains

      Q: How much new shelf space are you gaining?

      A: We are securing low double-digit increases in shelf space during spring resets, meeting our expectations. This varies by location but is significant overall.

    6. Consumer Health

      Q: Any signs of consumer downtrading or behavior shifts?

      A: Our consumers remain healthy with superb brand loyalty. The high end continues to see increased buy rates, indicating ongoing premiumization. Our nonalcoholic Corona was the #1 share gainer in its segment, reflecting trends toward "betterment".

    7. Pricing Strategy

      Q: Why is price mix below the category, and timing of increases?

      A: We target 1% to 2% price increases annually. Variance in price realization is due to timing, as we adjust prices SKU by SKU and market by market.

    8. Cost Savings

      Q: Details on beer cost savings and future plans?

      A: Achieved approximately $25 million in beer cost savings in fiscal '24, ramping up through the year. Initiatives included procurement and logistics improvements. Similar efforts will continue in fiscal '25.

    9. Currency Exposure

      Q: What's your peso-denominated cost exposure?

      A: About 20% to 25% of our beer costs are peso-denominated. We're hedged at 80% entering the year to mitigate currency risk.

    10. Inventory Levels

      Q: What's your view on inventory and destocking?

      A: We've seen inventory reductions, notably in Canada and some in the U.S.. We're focusing on our top 11 brands and increasing promotional spend to address consumer dynamics.