Corona, Modelo brewer takes double-whammy as Trump tariffs squeeze margins — and ICE crackdown slams sales
Constellation Brands, whose Modelo brand is the top-selling beer in the US, on Tuesday reported adjusted earnings per share of $3.22, below LSEG analysts' expectations of $3.31, in the first quarter ended May 31.
Trump hiked levies on aluminum to 25% in March and raised them again to 50% in early June, threatening to raise costs for products like beer, soda and energy drinks sold in cans.
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3 Constellation Brands owns Modelo, Corona and Pacifico.
Steve Cukrov – stock.adobe.com
Rochester, NY-based Constellation sells only imported Mexican beers like Corona and Pacifico – which also left it heavily exposed to 25% tariffs that Trump imposed on foreign beer imports in April.
While the tariffs hit margins, the company also reported disappointing revenue — just $2.52 billion in the latest quarter, versus Wall Street's forecast of $2.55 billion.
The beer maker blamed the sales shortfall on weaker demand 'largely driven by…non-structural socioeconomic factors,' as well as its divestiture of Svedka voda, according to CEO Bill Newlands.
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In April, Newlands said that Hispanic customers – who make up roughly half of Constellation's beer sales – had pulled back on buying from the brand amid Trump's immigration crackdown.
'The fact is, a lot of consumers in the Hispanic community are concerned right now,' Newlands said during a company conference call.
'Over half are concerned relative to immigration issues and how those impact [them]. A number of them are concerned about job losses in industries that have a high Latino employment base.'
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As a result, Hispanic consumers have cut back on discretionary spending, including goods and services like restaurants, clothing, travel – and beer, Newslands said.
3 Constellation saw its operating margin fall as it suffered a hit from tariffs on aluminum imports.
AFP via Getty Images
Shipment volumes in its beer business dropped 3.3% during the latest quarter on the slump in demand.
Its operating margin fell 150 basis points, or 1.5%, during the same period due, in part, to the aluminum tariffs, the company said.
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Shares in Constellation have fallen 25% so far this year. The stock plunged in January after the company reported weak fourth-quarter earnings and revealed a full-year forecast below expectations.
Constellation also sells wine and craft spirits, but its beer business is the real money maker, accounting for roughly 80% of total revenue.
3 A worker operating a pallet jack carrying stacks of cans.
ultramansk – stock.adobe.com
Constellation reported first-quarter net income of $516.1 million, or $2.90 per share, down from $877 million, or $4.78 a share, the year before.
However, Constellation maintained its full-year forecast, including comparable earnings per share of $12.60 to $12.90.
The company also expects organic net sales between a 2% decline to a 1% gain.
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