Thursday morning, beverage alcohol producer Constellation Brands, Inc. (STZ) said its first quarter profit fell 65% from previous year, hurt by one-time items and a 22% decline net sales. Excluding items, the company's non-GAAP comparable profit plunged 35%. Fairport, New York-based company noted that its quarterly non-GAAP earnings per share declined 32%, yet topped the Street view by six cents, with sales beating analysts' consensus. Further, Constellation Brands reaffirmed its fiscal year 2008 GAAP as well as non-GAAP earnings forecast. Separately, Constellation Brands revealed the appointment of Robert Sands as chief executive officer, effective July 26, succeeding Richard Sands. The company also said Richard Sands will continue in his role of chairman of the board.Q1 ResultsThe company's first quarter net income plunged 65% to $29.8 million from $85.5 million in the previous year. Quarterly income available to common stockholders was $29.8 million, down from $83.0 million a year ago. The company reported earnings of $0.13 per class A share, based on 233.4 million shares, which fell 64% from $0.36 per class A share, based on 240 million shares, in the prior year quarter. Earnings, on a per Class B share basis, declined to $0.12, based on 23.8 million shares, from $0.33, based on 23.9 million shares, a year ago. Constellation Brands' most recent first quarter results included inventory step-up items of $2.0 million or $0.01 per share, compared to last year's $0.8 million. Further, strategic business realignment charges of $16.7 million or $0.07 per share was included in the first quarter 2007, lower than $20.9 million or $0.09 per share in the last year. The company's prior year results also included other items of $32.5 million or $0.14 per share.Excluding items, the company's non-GAAP comparable net income fell 35% to $48.5 million from $74.7 million in the previous year. Earnings per share, on a comparable basis, decreased 32% to $0.21 from $0.31 last year.On average, 11 analysts polled by First Call/Thomson Financial estimated earnings of $0.15 per share for the quarter. For the sequential fourth quarter, Constellation Brands earned $70.2 million or $0.29 per share on a reported basis, and $84.8 million or $0.35 per share on a comparable basis.The company's quarterly sales decreased to $1.18 billion from $1.43 billion a year ago. Excluding excise taxes of $274 million in both periods, the company's net sales declined 22% to $901.2 million from $1.16 billion last year, yet beat seven Wall Street analysts' consensus revenue estimate of $885.76 million. On a constant currency basis, net sales fell 25%. However, consolidated organic net sales grew 2% to $755.9 million from $741.4 million last year. Sequentially, Constellation Brands' first quarter net sales plunged $1.14 billion in the fourth quarter. First quarter gross profit fell 16% to $268.2 million from previous year's $318.6 million. Meanwhile, gross margin grew to 29.8% from 27.6% in 2007. The company's operating income plummeted 52% to $68.2 million from $143.0 million last year. Operating margin was 7.6%, compared to 12.4% a year earlier. Non-GAAP operating income for the period declined 50% to $82.3 million from last year's $164.8 million, while non-GAAP operating margin dropped to 9.1% from 14.3% in 2007. The company's equity in earnings of equity method investees surged to $75.8 million from $0.1 million a year ago. For the quarter, the company's cost of product sold declined 24% to $633.0 million from $837.3 million a year earlier. Meanwhile, selling, general and administrative expenses increased 14% to $197.6 million from prior year's $172.6 million. Effective tax rate for the period was 53.7%, compared to 41.8% in 2007. SegmentsConstellation Brands noted that its Constellation Wines division generated quarterly net sales of $804.3 million that increased 5% from $764.5 million a year ago. Among this, Branded wine net sales increased 20% to $619.9 million from $517.2 million last year. However, on an organic basis, net sales declined 5%. Wholesale and other net sales fell 25% to $184.4 million from $247.3 million in the previous year. The segmental operating income for the quarter dropped 10% to $86.2 million from $96.2 million in 2007. Operating margin was 10.7%, compared to 12.6% a year earlier. The company did not generate any net sales from its Constellation Beers division in the most recent first quarter, while prior year net sales of $308.1 million, and operating income was $65.1 million or 21.1% of net sales. Constellation Spirits' quarterly net sales totaled $96.9 million, up 16% from $83.3 in the previous year. Operating income declined 11% to $15.8 million from $17.7 million a year earlier. Crown Imports generated net sales of $658.1 million in the first quarter, together with operating income of $146.3 million, while there were no such items in the last year. On a geographic basis, Constellation Brands' first quarter net sales from North America declined 32% to $506.2 million from prior year's $745.2 million. North American Branded wine net sales increased 13% year-over-year to $393.4 million. In Europe, total net sales declined 8% to $302.2 million from $329.4 million 2007. Australia/ New Zealand generated net sales of $92.8 million for the period, up 14% from $81.3 million a year ago.Commenting on the results, Richard Sands, chairman and chief executive officer, said, As we anticipated, our first quarter performance was impacted by our previously announced initiative to reduce distributor wine inventories in the U.S. as well as lower results from our U.K. business. We achieved a number of important strategic objectives during the quarter, including the acquisition of SVEDKA Vodka as a platform from which we can grow our premium spirits portfolio, the formation of a joint venture with Punch Taverns for the Matthew Clark wholesale business that will help strengthen our on-premise route to market for our branded portfolio in the U.K. and our utilization of $500 million for share repurchases.OutlookLooking ahead, Constellation Brands said it continues to expect fiscal 2008 earnings of $1.16-$1.26 per share on a reported basis, compared to fiscal 2007's earnings of $1.38 per share. On a comparable basis, full year earnings are anticipated to be in the range of $1.30-$1.40 per share, up from last year's $1.68 per share. For the year, the company estimate reported net sales to decrease 30%-32% from last year. The company further said it expects to record a low single-digit growth in organic net sales and low single digit incremental benefit from the acquisitions of Vincor International Inc. and the SVEDKA Vodka brand and related business.Analysts estimate Constellation Brands to report earnings of $1.36 per share, with expectations ranging from $1.30 to $1.45 per share, on revenues of $3.78 billion, which represents a year-over-year decline of 27.5%. Earlier, in mid-April, the company had cut its fiscal year 2008 GAAP earnings forecast from its prior outlook of $1.21 - $1.31 per share, due to the impact from a joint venture it formed with U.K. pub operator Punch Taverns, while maintaining its comparable earnings expectation. CEO AppointmentIn a separate communiqu, Constellation Brands revealed that its board of directors named Robert Sands as chief executive officer, effective July 26, succeeding Richard Sands. Robert, or Rob, Sands has been serving as the company's president and chief operating officer since December 2002. The company said Richard Sands will continue in his role of chairman of the board, the position which he holds from September 1999, while he was appointed as chief executive officer in 1993. Commenting on the appointment, James Locke III, head of the board's governance committee, said, Rob's 21 years with the company; his proven knowledge, experience and leadership abilities; established track record in having already served as Constellation's general counsel, chief operating officer and president; collectively give the board full confidence in his capabilities to lead the company. Rob Sands joined Constellation Brands in June 1986 as general counsel. In 1993 he was appointed executive vice president and general counsel and promoted to chief executive officer of Constellation International after the company's acquisition of the United Kingdom's Matthew Clark plc in 1998. From 2000 through most of 2002, he served as group president over both the U.K. operations and Canandaigua Wine Company. Meanwhile, Richard Sands joined the company in August 1979, and he was named executive vice president in 1982. Later in May 1986 he was appointed as president and chief operating officer.Further, the company promoted Keith Wilson to the newly created position of chief administrative officer and he will report to Rob Sands. Wilson is currently the executive vice president and chief human resources officer, and in the new role, he will be overseeing the company's global information technology, human resources and supply chain activities, in addition to having responsibility for the corporate communications and community relations group. In addition, Jose Fernandez will be promoted to the new position of chief executive officer for Constellation Wines North America. He is currently chief executive officer for Constellation Wines U.S. All the new positions are effective on July 26, the company said. Stock QuoteSTZ closed Wednesday's regular trading session at $24.13, up $0.49, on a volume of 2.3 million shares. For the past 52 weeks, shares have been trading in a range of $18.83-$29.17.
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April 24, 2026 15:15 ET Economics news flow was relatively light this week even as the conflict in the Middle East continued, raising concerns for policymakers. In the U.S., spending data, initial jobless claims and pending home sales were the highlights. Business confidence in the biggest euro area economy was in focus in Europe. Inflation data from Japan gained attention in Asia.