Constellation Brands, Inc. (NYSE: STZ) is a notable international producer and marketer of beer, wine, and spirits, with a significant presence in the U.S., Mexico, New Zealand, and Italy. The company has reported its first-quarter earnings for fiscal year 2026, indicating a period of decline in certain segments amid ongoing consumer demand challenges.

For the first quarter ended May 31, 2025, Constellation Brands posted a net sales figure of $2.515 billion, a decrease of 6% compared to $2.662 billion in the same quarter of the previous year. The operating income fell 24% to $714 million from $942 million year-over-year. The net income attributable to the company declined by 41% to $516 million, resulting in a diluted earnings per share (EPS) of $2.90 compared to $4.78 in the prior year.

The beer segment reported net sales of $2.235 billion, down 2% from $2.273 billion. The reported operating income for the beer business was $873 million, which indicates a decline of 5% from the previous year’s figure of $923 million, and the operating margin decreased to 39.1% from 40.6%. Specifically, depletions in the beer segment decreased by 2.6%, impacted by declines in key brands such as Modelo Especial and Corona Extra.

The wine and spirits segment experienced a more significant downturn, with net sales dropping 28% to $280.5 million, down from $389 million a year ago, largely attributed to a 30.4% decline in shipment volumes. This segment posted an operating loss of $6.0 million compared to an operating income of $59.7 million in the same quarter last year, leading to an operating margin that fell to -2.1% from 15.3%.

Constellation Brands maintains its fiscal year 2026 guidance of a reported EPS in the range of $12.07-$12.37 and comparable EPS of $12.60-$12.90. The company also reaffirmed its net sales growth projection for the beer segment at 0-3% and expects a 0-2% increase in operating income for this segment. However, in the wine and spirits segment, a significant decline in organic net sales is anticipated in the range of 17-20%, with an expected decline in organic operating income of 97-100%.

The company’s operating cash flow was reported at $637 million, an 8% decline from the previous year, whereas free cash flow increased by 41% to $444 million due to timing in brewery capacity investments. Additionally, Constellation Brands returned over $300 million to shareholders in the form of share repurchases during the quarter.

Overall, Constellation Brands is navigating challenges in the beer and spirits sector amidst a changing consumer landscape, with a focus on key strategic initiatives to enhance brand health and market presence. The company’s financial outlook appears cautious as it balances operational challenges with its guidance for the fiscal year.