Investopedia: Constellation Waits For The Stars To Be Right

Can the largest publicly-traded wine business regain the shareholder love it once enjoyed? Constellation Brands (NYSE:STZ) rode a heck of a wave as wine consumption took off in the U.S. about 10 years ago and the company acted as a major consolidator. Since then, though, the company has found that its empire hasn't quite validated the debt that underwrote its construction and the stock has not been the winner that its owners may have expected. 


A Sluggish Start to the Fiscal Year
Constellation Brands did not get its new fiscal year off to a roaring start. While reported revenue dropped more than 19%, organic revenue grew about 2%. Shipments fell more than 3%, depletions were down more than 2% and results in wine were generally disappointing. While the company's beer distribution business is doing pretty well, the company is losing some share in wine to the likes of Gallo, Wine Group and Trinchero.

Profitability was a better story, though. Gross margin jumped about five full points and operating income grew 12% from last year's level. Some of this improvement was due to less promotional spending - a mixed blessing that boosts margins but takes a toll on sales growth and market share. 



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