Consumers are spending again, but they’re cutting back on spending for alcoholic beverages — and booze giant Constellation Brands $STZ (STZ) is feeling the impact.
The beverage company plans to record a non-cash goodwill impairment loss of approximately $1.5 billion to $2.5 billion for its second quarter, prompting it to update its fiscal 2025 year outlook.
The charge reflects the company’s updated expectations for its wine and spirits business, which continued to show negative trends, primarily in its U.S. wholesale market. The company also pointed to retailers reducing their inventory of these products.
Bill Newlands, Constellation Brands’ CEO, said in a statement that despite “ongoing macroeconomic headwinds, particularly rising unemployment,” affecting overall consumer demand, the Modelo maker remains confident its beer segment will boost sales. “We are on track to deliver a solid mid single-digit volume increase this fiscal year for our Beer Business,” Newlands added.
Constellation Brands expects sales growth of 6% and 8% for its beer business. For its wine and spirits segment, the company expects sales to decline between 4% and 6%.
The anticipated decline comes just months after Constellation Brands said in July that it was getting a big boost from its foreign lagers, including Modelo Especial and Pacifico. At the time, the company, a leader in the production and marketing of wine, beer, and spirits, noted strong demand for its beer across all income cohorts. However, it also acknowledged “challenging dynamics” affecting its wine and spirits division.
With the rise in non-alcoholic options, and retailers aiming to attract cash-strapped consumers, Constellation Brands’ latest update may reflect how inflationary pressures are influencing consumer priorities.
Mickey Chadha, vice president at Moody’s, previously told Quartz that retailers are quickly realizing that “if shoppers don’t need an item or see the value in it, they’re not going to buy it.”
Shares of Constellation Brands were up by more than 2% during afternoon hours, trading at about $247.