Constellation Brands (STZ) Q1 2026 earnings summary

Executive summary

• Net sales declined 6% year-over-year to $2.52 billion, with organic net sales down 4%, driven by declines in both Beer and Wine & Spirits segments; Beer down 2%, Wine & Spirits down 28%.

• Operating income fell 24% to $714 million, primarily due to asset impairment, losses on commodity derivatives, and lower segment sales.

• Net income attributable to shareholders dropped 41% to $516 million, with diluted EPS down 39% to $2.90; comparable EPS was $3.22, down 10%.

• The company completed major divestitures, including mainstream wine brands and SVEDKA, and acquired the Sea Smoke luxury wine business.

• A restructuring initiative is underway, targeting over $200 million in annualized cost savings by FY2028, with $13.3 million in pre-tax costs recognized in Q1 FY2026.

Financial highlights

• Q1 FY2026 net sales: $2.52 billion, down from $2.66 billion in Q1 FY2025; organic net sales down 4%.

• Operating income: $713.8 million, down from $941.6 million year-over-year; comparable operating income down 11%.

• Net income attributable to shareholders: $516.1 million, down from $877.0 million; adjusted net income: $573 million, down 12%.

• Gross margin for Beer was 53.1%; consolidated operating margin was 28.4%, down from 35.4% year-over-year.

• Free cash flow for Q1 FY26 was $444 million, up 41% year-over-year, driven by timing of brewery investments.

Outlook and guidance

• Fiscal 2026 reported EPS outlook updated to $12.07–$12.37; comparable EPS maintained at $12.60–$12.90.

• Operating cash flow target for fiscal 2026 is $2.7–$2.8 billion; free cash flow projected at $1.5–$1.6 billion.

• Beer segment expects net sales growth of 0–3% and operating income growth of 0–2% for fiscal 2026; Wine & Spirits expects organic net sales decline of 17–20% and operating income decline of 97–100%.

• Sequential improvement is needed for guidance achievement, but easier year-over-year comparisons are anticipated in upcoming quarters.

• The restructuring initiative is expected to yield over $200 million in net annualized cost savings by FY2028.