01—Abstract
Summary
Summary of the 10-Q filed July 2, 2025. Cited figures are marked; the original filing is the authoritative source.
Constellation Brands, Inc. reported a weaker first quarter of fiscal 2026 (three months ended May 31, 2025).
Net sales declined to $2,515.0 milliona from $2,661.8 million, with Beer net sales of $2,234.5 million (down $38.3 million, or 2%) and Wine and Spirits net sales of $280.5 million (down $108.5 million, or 28%). Operating income fell 24% to $713.8 million, driven by $52.1 million of assets held for sale impairment and related expenses tied to the 2025 Wine Divestitures, unfavorable Comparable Adjustments including losses on undesignated commodity derivatives, and lower segment net sales. Net income attributable to CBI decreased 41% to $516.1 million, and diluted EPS fell to $2.90 from $4.78.
Management attributes the sales decline to weaker consumer demand, lower Wine and Spirits shipment volume, and retailer destocking, partially offset by Beer pricing. Cash flow from operations was $637.2 millionb, versus $690.5 million a year earlier. Capital expenditures dropped to $192.8 million from $375.3 million, and the company returned cash through $306.1 million of share repurchases and $182.2 million of dividends paid.
Total debt rose to $11,567.0 millionc, with a new $500.0 million 4.80% senior notes issuance in May 2025. Subsequent to quarter end, the company closed the 2025 Wine Divestitures for $857.6 million in net cash proceeds, used to repay debt, including the $500.0 million 5.00% February 2023 Senior Notes on June 12, 2025, and the $400.0 million 4.75% December 2015 Senior Notes on July 2, 2025.
The company also continues its 2025 Restructuring Initiative, which has incurred $63.0 milliond of cumulative pre-tax costs against an estimated $80 million to $100 million total, with net annualized cost savings expected to exceed $200 million by Fiscal 2028. Management expects Fiscal 2026 effective tax rate of 14% to 16% and plans to return $4.0 billion in share repurchases over the next three fiscal years, with $3,618.9 million remaining under the 2025 Authorization as of July 2, 2025.
02—Key points
Key Highlights
- Net sales fell 6% to $2,515.0 million; Wine and Spirits net sales dropped 28% to $280.5 million while Beer net sales declined 2% to $2,234.5 million.
- Operating income decreased 24% to $713.8 million, including $52.1 million of assets held for sale impairment and related expenses and $96.1 million of total Comparable Adjustments.
- Net income attributable to CBI declined 41% to $516.1 million; diluted EPS was $2.90 versus $4.78 a year earlier, with a prior-year $83.3 million gain on Exchangeable Shares not repeated.
- Cash from operations was $637.2 million versus $690.5 million; capital expenditures fell to $192.8 million from $375.3 million.
- The 2025 Wine Divestitures closed June 2, 2025 for $857.6 million in net cash proceeds, used to repay debt, including the $500.0 million 5.00% February 2023 Senior Notes and $400.0 million 4.75% December 2015 Senior Notes.
- Total debt rose to $11,567.0 million, including a new $500.0 million 4.80% senior notes issuance; the revolving credit facility was refinanced to April 28, 2030 maturity.
- Share repurchases of $306.1 million in the quarter, with $3,618.9 million remaining under the $4.0 billion 2025 Authorization as of July 2, 2025.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2026, Constellation Brands kept $0.21.
- Revenue$2.52B100.0%
- Cost of revenue−$1.25B49.6%
- Gross profit$1.27B50.4%
- Operating costs−$552.8M22.0%
- Operating income$713.8M28.4%
- Interest, other & tax−$197.7M7.9%
- Net income$516.1M20.5%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2026filed July 2, 2025Financial Statements
Q1 FY2026 against Q1 FY2025
| Line item | Q1 FY2026Q1 FY2025 | Change |
|---|---|---|
| Revenue | $2.52B$2.66B | −5.5% |
| Cost of Revenue | $1.25B$1.26B | −0.8% |
| Gross Profit | $1.27B$1.40B | −9.8% |
| SG&A Expenses | $500.70M$462.20M | +8.3% |
| Operating Income | $713.80M$941.60M | −24.2% |
| Net Income | $516.10M$877.00M | −41.2% |
05—Questions
Frequently Asked Questions
Why did operating income drop so sharply this quarter?
Operating income fell 24% to $713.8 million, primarily due to unfavorable Comparable Adjustments, including $52.1 million of assets held for sale impairment and related expenses tied to the 2025 Wine Divestitures and losses on undesignated commodity derivative contracts, along with declines in Wine and Spirits and Beer net sales. Cost savings in the Beer segment partially offset these effects.
What is the status of the Wine and Spirits business?
Wine and Spirits net sales declined 28% to $280.5 million, with organic branded shipment volume down and a $36.0 million impact from the SVEDKA Divestiture. Management cited weaker consumer demand in the U.S. wholesale market, particularly mainstream price segments, and retailer destocking. On June 2, 2025, the company sold and exclusively licensed a portion of this business, primarily mainstream wine brands, for $857.6 million in net cash proceeds.
How is the company managing its debt and capital returns?
Total debt was $11,567.0 million at May 31, 2025, up $69.3 million from February 28, 2025. The company issued $500.0 million of 4.80% senior notes due 2030 and used the 2025 Wine Divestiture proceeds to repay the 5.00% February 2023 and 4.75% December 2015 senior notes. Management expects to return $4.0 billion to stockholders through share repurchases over the next three fiscal years and continues quarterly dividends, declaring $1.02 per Class A share on July 1, 2025.
What is the 2025 Restructuring Initiative expected to deliver?
The company has recognized $63.0 million of cumulative pre-tax restructuring costs since inception, with $13.3 million recognized in the quarter. Total cumulative costs are estimated at $80 million to $100 million, with most work expected to be completed within Fiscal 2026. The initiative is expected to yield over $200 million in net annualized cost savings by Fiscal 2028.
What risks are highlighted in the filing?
The filing highlights a challenging consumer demand environment marked by subdued spending, value-seeking behavior, and inflation, plus evolving tariff policies affecting imports from Mexico, the European Union, and New Zealand. Higher material costs, including aluminum tariffs, and unfavorable fixed cost absorption weighed on Beer gross profit. Three derivative stockholder complaints relating to a putative class action (Meza v. Constellation Brands) are also pending.
06—Continue