STZ's Wine & Spirits Rebound: Strategic Reset Fuels Momentum?

Constellation Brands Inc.’s STZ wine & spirits business delivered a solid rebound in the fourth quarter of fiscal 2025, reflecting the success of its ongoing portfolio transformation. Segment sales rose 5% year over year, supported by a 3.5% increase in shipment volumes. Organic sales grew an impressive 11%, driven by a 15.7% rise in organic shipment volume. Growth was underpinned by contractual distributor payments, a favorable product mix, strength in the U.S. wholesale channel and robust international volumes, particularly from Canada. Despite a 2.4% decline in depletions, the underlying performance signals improving momentum in the business.

As part of its long-term strategy to elevate its portfolio, STZ has signed an agreement with The Wine Group to divest a set of mainstream wine brands, associated vineyards and facilities. The deal, expected to close shortly after the first quarter of fiscal 2026, supports the company’s premiumization agenda. By shedding lower-end offerings, STZ aims to sharpen its focus on high-end wine and craft spirits brands that align with evolving consumer preferences. This move not only improves product mix but also strengthens brand equity across key markets.

Constellation Brands is also implementing a broad organizational restructuring expected to yield more than $200 million in annualized cost savings by fiscal 2028, with the majority realized in fiscal 2026. These cost efficiencies, combined with a more premium-focused brand portfolio, are expected to drive margin expansion and long-term growth. Overall, the recovery in wine & spirits marks a pivotal step in STZ’s journey toward sustainable, high-value performance.

STZ’s renewed focus on premiumization, strategic divestitures and structural efficiencies is positioning its wine & spirits business for sustained profitability and relevance in a dynamic market. The turnaround marks a critical milestone in its transformation journey.

STZ’s Valuation Picture

Constellation Brands is currently trading at a forward 12-month price-to-earnings (P/E) multiple of 12.34X, which positions it at a discount compared with the industry’s average of 15.35X. Also, STZ is priced lower than the sector’s average of 17.37X.

STZ’s Stock Performance

Shares of this Zacks Rank #3 (Hold) company have lost 12.2% in the past three months compared with the industry’s modest 1.1% decline.

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This article originally published on Zacks Investment Research (zacks.com).

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