Constellation Brands (NYSE:STZ) has seen its stock crater since markets began slumping in late February and early March. The company is likely to see a significant sales disruption from the COVID-19 outbreak and related economic contraction around efforts to contain the coronavirus. Its major bet on Canopy Growth (NASDAQ:CGC), meanwhile, has hurt the value of its own stock.
On the other hand, the consumer staples giant might have some positive news to report on sales trends at its retailing partners even as customer traffic plummets at restaurants and bars. Constellation Brands will also issue some important updates on its cash flow trends through the latest market upheaval.
With that bigger picture in mind, let's look at a few metrics investors will be watching when the alcoholic beverage giant reports fiscal fourth-quarter results on Friday, April 3.
Constellation Brands had healthy momentum before COVID-19 reached pandemic status. Sales in its core beer business grew in 2019 to mark the 10th consecutive year of market share gains for the owner of popular import brands like Corona and Modelo. The company notched another period of rising average prices, too, as consumers shelled out for these premium beverages while shifting consumption away from craft beers.
Its business was showing signs of strain, though, with beer sales gains slowing as people bought more hard seltzers. Executives had hoped to achieve faster growth and rising operating margins in the wine and spirits segment, too. The fourth-quarter sales period will include wholesale order volumes through February, which won't show much impact from the social distancing efforts that state and local governments began putting into place in mid-March.
How big of a sales hit?
Management will comment about the trends they're seeing for the start of the fiscal first quarter, which coincides with widespread customer traffic declines at restaurants and bars in major markets in California, New York, and the State of Washington.
It's likely that the social distancing efforts significantly reduced sales to these establishments over the last few weeks. Constellation Brands may have offset at least some of that slump with increased orders at retailers like grocery stores, convenience stores, and warehouse shops.
Investors will be most interested to hear management's plan for navigating through the health crisis. That will include an update on the supply chain that will show whether Constellation Brands can meet the extra consumer demand on the retailing side of the industry. Shareholders will want to know how strong the balance sheet is looking as many companies begin to stock up on cash, too.
Looking further out, Constellation Brands might have some major changes in store for its release schedule in fiscal 2021. Management had been betting on a new Corona-branded hard seltzer to reinvigorate sales growth while a change in leadership at Canopy Growth helps that business improve its profitability.
That positive operating picture has been threatened by the coronavirus outbreak and the related economic slowdown, so look for management to give an updated reading on the health of their business and the wider alcoholic beverage industry for 2020.