Liquor giant Constellation Brands warned on Tuesday that it may be forced to write down the value of its assets by as much as $2.5 billion this year due to sluggish demand for wine as consumers cut back on non-essential purchases amid high inflation.
The Rochester, New York-based company, which owns brands such as Corona, Modelo, Robert Mondavi and Casa Noble, said a non-cash goodwill impairment charge of between $1.5 billion and $2.5 billion will negatively impact its second-quarter results.
Constellation nearly halved its profit outlook to $7.92 per share from $3.05, down from its earlier forecast of $14.63 to $14.93 per share.
The company lowered its total sales growth forecast to 4% to 6% from 6% to 7%.
“Ongoing macroeconomic headwinds, particularly rising unemployment, have recently led to a slowdown in the growth rate of consumer demand for our products,” Chief Executive Bill Newlands said in a statement.
Constellation said it expects sales in its wine and spirits division to fall 4 to 6 percent this year.
The company had previously expected sales in the division to be in line with the previous year.
The company said it would adjust prices and step up marketing efforts to offset some of the sales challenges in its wine and spirits business.
The company said it expects sales at its beer division to grow 6-8 percent, while its wine and spirits business will weaken.
However, growth in the beer sector fell short of expectations.
Newlands said the drop in demand was most pronounced in Constellation's top five states for beer business, which accounts for more than half of its total sales.
He did not specify the state.
The company reported higher first-quarter profits due to improved margins and strong beer sales and raised its profit outlook in July.
Constellation Brands on Tuesday raised the lower end of its earnings-per-share forecast by 10 cents to between $13.60 and $13.80 from a range of $13.50 to $13.80, to show what the company would earn if the $2.5 billion loss wasn't affected.
Constellation shares rose 2% on Tuesday and are up 0.7% so far this year.
Constellation's market cap is $44.99 billion.
