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Constellation Brands (STZ -7%) is under pressure today after slashing its FY26 guidance this morning, sending shares to a new 5-year low. This beer, wine, and spirits company has been in rough shape, down 32% YTD, as it contends with a challenging and uncertain backdrop.

• The slashed guidance reflects the ongoing challenges the beer and spirits industry has been facing. Management pointed out dampened consumer demand and more volatile purchasing behavior since it presented its Q1 (May) results. More specifically, high-end beer rates decelerated sequentially, as both trip frequency and spend per trip declined. Also, high-end beer buy rate declines for Hispanic consumers were more pronounced than general market declines. The Hispanic consumer is roughly half of STZ's business, which has an outsized impact on its Beer Business compared to the broader beer category.
• The guidance cut was pretty significant. Comparable EPS is now expected to be $11.30-11.60, down from $12.60-12.90. Breaking it down, beer net sales growth is expected to decline -4% to -2%, versus prior guidance of +0-3%. That translates into enterprise organic net sales falling -6% to -4%, versus prior -2% to +1%. The cut reflects incremental macroeconomic headwinds weighing on consumer demand. Beer operating income is also expected to decline -9% to -7%, versus prior +0-2%, pressured by lower volumes, operating deleveraging, and tariffs. As a result, comparable enterprise operating income is now expected to decline -11% to -9%, versus prior -3% to -1%.
• We think investors are likely surprised by the significant slash to FY26 guidance, especially since the company reaffirmed its outlook on its Q1 (May) call in early July. Its Q1 results came in largely as expected, with management acknowledging ongoing consumer concern but noting no material change in behavior. At the time, management expressed confidence in achieving its guidance based on an expected sequential improvement in 2H26, particularly in its Beer Business, supported by cost-saving initiatives.
• The slashed guidance from STZ is putting pressure on others in the industry, with peers Anheuser-Busch (BUD -2.4%), AmBev (ABEV -2.4%), Boston Beer Co (SAM -1.9%), and Molson Coors Brewing (TAP -0.9%) all trading lower, reflecting investor concern of similar headwinds.

The slashed guidance reflects the ongoing challenges in the beer and spirits industry. While investors have likely anticipated a challenging environment, we think they were not expecting a substantial guidance cut, given that STZ reaffirmed its guidance in early July and expressed confidence in achieving it.