Constellation Brands swung to $1.69B GAAP profit ($9.61/share) from a write-down-driven loss, but net sales fell 10.5% to $9.14B after wine divestitures, beer shipments fell 3.8%, and comparable EPS dropped 14% to $11.82.
Revenue
$9.1B
-10.5% YoY
Net income
$1.7B
Diluted EPS
$9.61
Operating margin
29.8%
Overview
Constellation Brands, the US importer and brewer of Modelo, Corona and Pacifico, had a year in which reported profit rebounded sharply but the business underneath shrank. Net sales fell 10.5% to $9.14 billion in fiscal 2026 (the year ended February 28, 2026). Most of that drop was deliberate: in June 2025 the company sold its mainstream wine brands, and in January 2025 it sold SVEDKA vodka. The businesses it sold accounted for $711.2 million of fiscal 2025 sales. Beer, which made up 91% of net sales, also slipped. Shipments fell 3.8%, and aluminum tariffs raised costs.
Reported (GAAP) net income attributable to Constellation was $1,686.7 million, or $9.61 per diluted share, compared with a loss of $81.4 million ($0.45 per share) a year earlier. That swing is not an operating recovery. Fiscal 2025 carried $2,797.7 million of goodwill and trademark write-downs on the wine business, plus $478.0 million of other asset impairments. A write-down (impairment) is a non-cash charge taken when an asset is judged to be worth less than its value on the books. On the company's own "comparable" basis, which strips out such one-off items, EPS fell 14% to $11.82 from $13.78. That is the more honest read of the year.
Key figures
Metric
FY2026
FY2025
YoY Change
Net sales
$9,139.0M
$10,208.7M
-10.5%
Gross margin
51.6%
52.1%
-0.5 pts
Operating income
$2,721.4M
$354.9M
Read 0 community reports on Constellation Brands, or write your own.Write a report
Operating margin is the share of net sales left after running the business, before interest and tax. Sources: FY2026 Form 10-K; comparable EPS, segment margins and free cash flow are from the Q4 FY2026 earnings release (8-K Exhibit 99.1, April 8, 2026). Free cash flow is operating cash flow ($2,669.0M vs. $3,152.2M) minus capital spending ($875.0M vs. $1,214.1M).
Takeaway: The jump from a loss to $1.69 billion of profit is an accounting echo of last year's $3.3 billion of wine write-downs. The business itself went backwards: comparable EPS fell 14%, beer volumes fell for the year, and beer's operating margin (the profit engine of the company) lost 1.7 points to tariffs and lower brewery output. Management's fiscal 2027 plan assumes beer sales only hold flat.
Beer: shipments down, Pacifico up, tariffs biting
Constellation tracks two volume measures. Shipments are cases it sells to its distributors. Depletions are cases distributors sell on to stores and bars, which is closer to what consumers actually buy. In fiscal 2026 beer shipments fell 3.8% and depletions fell 2.1%. Shipping less than distributors sold means distributors ran down their stockpiles. The 10-K says management expects shipments "to generally align with depletion volume for Fiscal 2027."
Performance varied a lot by brand. According to the earnings release, depletions fell about 3% for Modelo Especial, about 7% for Corona Extra and about 1% for the Modelo Chelada brands. Depletions grew more than 15% for Pacifico and 16% for Victoria. The company says its beer business still gained 0.4 points of dollar share in Circana-tracked US channels, and Modelo Especial remained the #1 beer brand by dollar sales. In other words, the whole beer category shrank faster than Constellation did.
Beer net sales fell 3% to $8,315.2 million. The 10-K breaks that change into three parts:
a $323.0 million hit from lower volume;
$29.8 million of unfavorable mix, mainly a shift in package types;
a $128.2 million gain from higher prices in select markets, which offset part of the decline.
Management attributes the weaker demand to "economic uncertainty and socioeconomic factors," including subdued spending and value-seeking behavior. Hispanic consumers are the core buyers of Modelo and Corona. The filing does not separately put a number on Hispanic-consumer demand. It does list changes in immigration laws, policies and enforcement "impacting consumers, particularly Hispanic consumers" as a risk factor.
Costs and tariffs. Beer gross profit fell $204.6 million (-4%). Cost of product sold rose $149.5 million, driven mainly by three items:
$58.3 million of tariffs, largely on aluminum imports under Section 232. Aluminum is the material for the cans. The tariff cost was on packaging inputs, not on the finished Mexican beer.
$58.2 million of unfavorable fixed-cost absorption. When the breweries produce less, their fixed costs are spread over fewer cases, so each case costs more.
$14.6 million of higher brewery maintenance and utility costs.
Procurement and logistics savings delivered "over $200 million of net benefit," which limited the damage. Even so, beer operating income fell 7% to $3,161.0 million, and beer operating margin fell from 39.7% to 38.0%. Relief arrived after year-end: in April 2026 the US government removed malt beer from the scope of the Section 232 aluminum tariffs, which had been in place at various rates since February 2025.
Fourth quarter. The release shows a turn in volume, though not in margin. Q4 beer depletions rose 0.6%, shipments rose 1.1% and net sales rose just over 1%. Q4 beer operating margin still fell 3.4 points to 33.2%, because of fixed-cost absorption, higher depreciation and aluminum tariffs.
Wine & Spirits: a much smaller business after the sales
Wine & Spirits net sales halved, from $1,668.9 million to $823.8 million. Of the $845.1 million decline, $711.2 million came from the divested businesses. The other $133.9 million was an organic decline, meaning a decline in the brands the company still owns, of about 14%. That organic decline came from four sources:
lower shipments ($43.0 million);
unfavorable mix ($38.9 million);
$30.0 million less in contractual payments from distributors;
$17.6 million of price cuts on certain brands.
Organic shipments fell 6.7% and depletions fell 4.3%. The company also cited about $10 million of IEEPA tariffs, plus retaliatory tariffs abroad, including Canadian boycotts of US products.
The segment's operating margin collapsed from 19.5% to 1.3%, leaving only $10.5 million of operating income. The June 2025 wine sale raised $845.9 million in cash, which went to repay debt. It was recorded at a small loss ($31.9 million total loss on sale of business in fiscal 2026). The larger damage had already been booked in fiscal 2025, when wine goodwill was written down to zero ($2,740.7 million) and $57.0 million of wine trademarks were impaired. In fiscal 2026 the segment also carried $35.7 million of costs for transition services provided to the buyers of the sold brands. The company counts these outside its comparable results.
The release shows the remaining higher-end portfolio growing depletions by more than 8% in Q4. Management guides segment operating margin to 5–6% in fiscal 2027.
GAAP vs. comparable earnings
Comparable EPS excludes items that management treats as unrelated to ongoing operations. In fiscal 2026 these totaled $2.21 per share, according to the release. The 10-K lists the main operating items:
$109.8 million of asset impairments and related costs, including a $57.7 million loss from dismantling and abandoning aged equipment at the Obregón brewery, plus contract and inventory costs tied to the wine sale;
$72.2 million of restructuring costs under the 2025 Restructuring Initiative. The program targets over $200 million of annual net savings by fiscal 2028, at about $130 million of total cost;
the $31.9 million loss on sale of business;
$7.8 million of CEO severance and transition costs.
In fiscal 2025 the gap between the two measures was far larger: $14.23 per share, driven by the wine write-downs.
Below operating income, the picture is mixed. Interest expense fell 14% to $352.6 million because average borrowings were about $805 million lower. Taxes went the other way: fiscal 2026 had a normal tax charge (a 26.1% effective rate), while fiscal 2025 had a tax benefit.
Cash, capacity and shareholder returns
Operating cash flow fell 15% to $2,669.0 million. Capital spending fell to $875.0 million, of which $762.4 million went to beer, mostly for adding capacity at the Nava, Obregón and Veracruz breweries in Mexico. The 10-K says initial production at the new Veracruz brewery is expected to start "around the middle of Fiscal 2027," and plans about $800 million of fiscal 2027 capital spending, "almost entirely" on these brewery projects. The release shows $924 million of share buybacks in the year and a quarterly dividend raised 1% to $1.03 per share. The release puts total cash returned to shareholders at more than $1.6 billion, with comparable net leverage (debt relative to earnings) held at about 3.0x.
The risk section flags the downside of building capacity while volumes shrink: the company "may not achieve the intended financial and operational benefits of these investments, including if we develop excess capacity that outpaces demand."
Outlook
Fiscal 2027 guidance (April 8, 2026 release):
Comparable EPS of $11.20–$11.90, against $11.82 in fiscal 2026. At the midpoint that is roughly flat.
Beer net sales between -1% and +1%.
Enterprise operating margin of 32–33%, with beer at 37–38% and Wine & Spirits at 5–6%.
Operating cash flow of $2.4–2.5 billion and free cash flow of $1.6–1.7 billion.
Management also withdrew its fiscal 2028 outlook, citing "limited near-term visibility."
Latest quarter: Q1 FY2027, three months ended May 31, 2026 (10-Q filed July 1, 2026):
Net sales fell 3.3% to $2,432.7 million, because the prior-year quarter still included $142.0 million of since-divested wine sales. On an organic basis, net sales rose 3% (per the release).
Operating income rose 18% to $845.3 million, a 34.7% margin.
Net income attributable to CBI rose 26.7% to $653.8 million. Reported diluted EPS was $3.79 (+31%) and comparable EPS was $3.43 (+7%), per the release.
Beer shipments rose 1.8% to 113.3 million cases while depletions dipped 0.3%. Pacifico was up about 21% and Victoria about 14%; Modelo Especial fell about 2% and Corona Extra more than 5%. Beer operating margin held at 39.0%.
The 10-Q shows beer cost of product sold still carried $13.0 million of tariffs, largely on aluminum. Better fixed-cost absorption from higher production ($30.7 million) more than offset it.
Wine & Spirits organic net sales rose 8%.
Management raised reported EPS guidance to $11.50–$12.20 and kept comparable EPS guidance at $11.20–$11.90.
Our view: Q1 suggests the fiscal 2026 volume decline has at least stopped. Shipments grew again, better production levels undid part of last year's cost penalty, and aluminum tariff relief on beer should reduce costs further. But depletions, the best measure of real consumer demand, are still slightly negative. The two largest brands, Modelo Especial and Corona Extra, are still shrinking, and Pacifico's growth is not yet enough to offset them. Guidance implies a year with little or no earnings growth while the company spends about $800 million to add brewing capacity. The key question for the next few quarters is whether Modelo and Corona return to growth. If they don't, the new Veracruz capacity will come online ahead of demand.