01—Abstract
Summary
Summary of the 10-Q filed January 10, 2025. Cited figures are marked; the original filing is the authoritative source.
Constellation Brands, Inc. reported results for the three and nine months ended November 30, 2024 (Third Quarter and Nine Months 2025).
Net sales for the nine months rose to $8.04 billiona from $7.82 billion, driven by Beer growth, partly offset by lower Wine and Spirits sales. However, the company recorded a $2.25 billion goodwill impairment on its Wine and Spirits reporting unit in the nine-month period, which cut operating income to $505.2 million from $2.54 billion and reduced net income attributable to CBI to $293.9 million from $1.34 billion. Diluted earnings per share for the nine months were $1.61 versus $7.25 a year earlier.
In the third quarter alone, net sales were essentially flat at $2.46 billionb, Beer net sales grew 3% on pricing and shipment volume, and Wine and Spirits net sales fell 14%. Net income attributable to CBI increased 21% to $615.9 million, largely due to a lower income tax provision. The company also recorded a $38.6 million impairment on its Exchangeable Shares in Canopy, and the balance sheet shows total assets down to $22.81 billion from $25.69 billion, mainly reflecting the goodwill write-down and lower goodwill balances.
Subsequent to quarter end, on January 6, 2025, the company sold the SVEDKA brand for $409.2 millionc in cash proceeds and expects a gain of $250 million to $275 million. The company repurchased $668.1 million of treasury stock during the nine months, fully utilized its 2021 repurchase authorization, and now plans fiscal 2025 capital expenditures of $1.3 billion, including $1.0 billion for Beer, primarily for the Mexico Beer Projects.
02—Key points
Key Highlights
- Nine-month goodwill impairment of $2.25 billion tied to the Wine and Spirits reporting unit, driven by declines in the U.S. wholesale wine market and mainstream and premium wine brands.
- Nine-month net sales of $8.04 billion, up from $7.82 billion, with Beer net sales of $6.84 billion rising on shipment volume and pricing, while Wine and Spirits net sales fell to $1.21 billion.
- Third-quarter net income attributable to CBI of $615.9 million, up from $509.1 million, largely due to a lower income tax provision; effective tax rate was 6.6% versus 20.0% a year earlier.
- Operating cash flow for the nine months was $2.56 billion, compared with $2.35 billion in the prior-year period.
- Total debt outstanding was $11.58 billion at November 30, 2024, down $300.2 million from February 29, 2024; the company was in compliance with its 2022 Credit Agreement covenants.
- SVEDKA divestiture completed January 6, 2025 for $409.2 million cash proceeds, with an expected gain of $250 million to $275 million in fiscal 2025.
- Quarterly dividend declared at $1.01 per Class A share, and the company fully used its $2.0 billion 2021 share repurchase authorization in November 2024.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2025, Constellation Brands kept $0.25.
- Revenue$2.46B100.0%
- Cost of revenue−$1.18B47.9%
- Gross profit$1.28B52.1%
- Operating costs−$491.3M19.9%
- Operating income$793.0M32.2%
- Interest, other & tax−$177.1M7.2%
- Net income$615.9M25.0%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2025filed January 10, 2025Financial Statements
Q3 FY2025 against Q3 FY2024
| Line item | Q3 FY2025Q3 FY2024 | Change |
|---|---|---|
| Revenue | $2.46B$2.47B | −0.3% |
| Cost of Revenue | $1.18B$1.20B | −1.7% |
| Gross Profit | $1.28B$1.27B | +1.1% |
| SG&A Expenses | $491.30M$473.70M | +3.7% |
| Operating Income | $793.00M$796.90M | −0.5% |
| Net Income | $615.90M$509.10M | +21.0% |
05—Questions
Frequently Asked Questions
Why did net income attributable to CBI fall so sharply for the nine months?
The decline from $1,335.0 million to $293.9 million was largely due to the $2.25 billion goodwill impairment of the Wine and Spirits reporting unit recorded in the nine months ended November 30, 2024, partially offset by favorable Canopy-related activity, a tax benefit, and Beer segment improvements.
How is the Beer business performing?
Beer segment net sales rose 6% for the nine months to $6.84 billion, driven by $296.4 million of shipment volume growth and $124.3 million of favorable pricing, partially offset by $45.1 million of unfavorable product mix. Segment operating income increased to $2.77 billion from $2.51 billion.
What is the company's outlook for its effective tax rate and capital spending?
The company expects its reported effective tax rate for Fiscal 2025 to be in the range of 7% to 9%, including the impact of the SVEDKA Divestiture. It plans to spend $1.3 billion on capital expenditures in Fiscal 2025, including $1.0 billion for the Beer segment, primarily for the Mexico Beer Projects.
What risks does management highlight for the Wine and Spirits business?
Management attributes the segment's decline to a decrease in branded wine and spirits shipment volume in the U.S. wholesale market, driven by declines in the overall wine market and in its mainstream and premium wine brands, as well as retailer inventory destocking. The filing notes a future impairment of Wine and Spirits goodwill is reasonably possible if conditions deteriorate.
What happened with the investment in Canopy?
The company converted its 17.1 million Canopy common shares into Exchangeable Shares and recognized an $83.3 million net gain in the nine months. It later impaired the Exchangeable Shares by $38.6 million, writing the $97.3 million carrying value down to $58.7 million as of November 30, 2024.
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