Although the Corona manufacturer’s fiscal third-quarter earnings above Wall Street’s projections, Constellation Brands said on Wednesday that economic hardship among its sizable Hispanic customer segment and a weaker construction sector continued to impact on beer demand.
After hours on Wednesday, Constellation’s stock (STZ) increased 1.7%.
“The U.S. consumer continued to face ongoing socioeconomic headwinds during the quarter, and we saw continued pronounced weakness amongst the Hispanic consumer cohort specifically,” executives from the company stated in advance.
“This has an outsized impact on our beer business compared to the broader beer category given higher levels of exposure to Hispanic consumers within our brand portfolio,” they said.
Constellation said that while consumer sentiment declined, unemployment rates increased slightly from the previous quarter. It further said that Hispanic consumers have higher unemployment rates than the general U.S. population.
Additionally, executives stated that the market for beer has been impacted by a decline in “4,000-pluscalorie” jobs, or energy-intensive professions like construction. They saw a slowdown in the increase of construction workers overall, with California seeing a decline.
For its third quarter, which ended in November, Constellation, which distributes wine brands like Kim Crawford and beers like Corona and Modelo in the United States, posted adjusted earnings per share of $3.06. That above the $2.63 FactSet expert expectation. While beer net sales for the quarter decreased 1% year over year, sales of $2.22 billion above Wall Street’s projections of $2.15 billion.
The business maintained its adjusted earnings per share projection of $11.30 to $11.60 for the entire fiscal year. However, it stated that it still anticipates a decline in beer, wine, and spirits sales during that time.
Over the previous 12 months, Constellation’s stock has decreased by almost 36%. This decline has come after issues with Constellation’s operations as well as worries about a wider wellness-focused shift away from alcohol usage.
About half of the company’s beer sales, according to corporate executives in April, came from Hispanic customers. According to CEO Bill Newlands at the time, a large number of those customers were worried about “immigration issues” in light of the United States’ vigorous deportation campaign. Additionally, according to Newlands, they were worried about “job losses in industries that have a high Latino employment base,” which had an impact on social gatherings and buying habits.
Newlands expounded on the influence of the construction sector on Constellation’s operations during a September conference.
“If you think about 4,000-calorie jobs that we often like to talk about, those are down,” he stated. “One excellent example is construction, which is declining annually. The beer sector tends to benefit from those [industries].
