Constellation Brands (STZ) Q1 2024 Earnings Call Transcript Summary
Constellation Brands (STZ) Q1 2024 Earnings Call Transcript
Bullish Points:
1. Beer business delivered net sales growth of 11%.
2. Depletion performance accelerated throughout the quarter, resulting in a 5.5% increase.
3. Strong demand for high-end Mexican beer brands.
4. Modelo Especial became the No. 1 beer in America in dollar sales during the first quarter.
5. Successful beer innovations.
6. Expansions of beer brewing capacity advancing as planned.
7. Higher-end wine portion of the business gained share in the U.S. wine category.
8. Wine and spirits business delivered significant operating margin expansion in Q1.
9. Direct-to-consumer channel's net sales grew 13% in Q1.
10. Distributor inventories remain at normal seasonal levels.
Bearish Points:
1. Mainstream wine brands faced lower demand.
2. Larger premium and luxury wine brands faced softer segment demand in April.
3. Continued inflationary headwinds in COGS.
4. Higher packaging, raw materials, freight, and overhead costs.
5. Wine and spirits organic net sales down 6%.
6. Mainstream brands, Woodbridge and Svedka, facing growth headwinds.
7. Interest expense for the quarter increased by 34% due to higher average borrowings and rising interest rates.
8. On-premise still not back to pre-pandemic levels.
9. Some commodity prices remain high.
10. Strength of the peso offsetting commodity favorability.
In summary, Constellation Brands (STZ) reported strong growth in their beer business, with Modelo Especial becoming the No. 1 beer in America in dollar sales during Q1 2024. The company's higher-end wine and spirits brands also gained market share and delivered significant operating margin expansion. However, mainstream wine brands faced lower demand, and the company experienced inflationary headwinds in COGS, higher costs, and increased interest expenses. Despite these challenges, Constellation Brands remains confident in their outlook for the full year and is building momentum heading into the key summer selling season for their beer business and the seasonally stronger second half for their wine and spirits business.
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