Liquor giant Constellation Brands warned on Tuesday it may be forced to write down the value of its assets by up to $2.5 billion this year as consumers shy away from non-essentials amid inflation and weak demand for alcohol.
The Rochester, New York-based company — which owns brands such as Corona, Modello, Robert Mondavi and Casa Noble — said a non-cash goodwill impairment of between $1.5 billion and $2.5 billion would impact its second-quarter results.
Constellation cut its earnings forecast by nearly half to $3.05 to $7.92 per share, well below initial expectations of between $14.63 to $14.93 per share.
The company lowered its overall sales forecast from between 6% and 7% to between 4% and 6%.
“The growth rate of consumer demand for our products has recently declined due to the current macroeconomic challenges, particularly rising unemployment,” CEO Bill Newlands said in a statement.
Constellation said it expects sales at its wine and spirits division to decline 4% to 6% this year.
The company had earlier expected sales in this division to remain similar to the previous year.
The company said it would adjust prices and enhance its marketing efforts to address some of the sales challenges in its wine and spirits business.
While its wine and spirits business declined, the company said it expects sales growth of 6% to 8% in its beer division.
However, its beer division grew less than expected.
Newlands said the drop in demand has been most pronounced in the top five states for its beer business, which accounts for more than half of Constellation's total sales volume.
He did not name the states.
The company raised its profit forecast in July after it reported a rise in first-quarter profit due to better margins and higher beer sales.
On Tuesday, Constellation Brands raised its bottom line for comparable earnings per share by a penny to between $13.60 and $13.80, from between $13.50 and $13.80 to reflect what their earnings would have been if they weren't impacted by the $2.5 billion loss.
Constellation shares rose 2% on Tuesday, and are up 0.7% so far this year.
Constellation has a market capitalization of $44.99 billion.
