Constellation Brands, Inc. 2027 Q2 Earnings Call

Thank you, Rob, and good morning, all. Welcome to Constellation Brands Q2 Fiscal 2027 conference call. I'm joined this morning by Nick Fink, our CEO, and Garth Hankinson, our CFO. Before we proceed, we trust you had the opportunity to review the news release and CEO/CFO commentary made available in the investor section of our company's website, www.cbrands.com. On that note, as a reminder, reconciliations between the most directly comparable GAAP measure and any non-GAAP financial measures discussed on this call are included in the news release and website. We also encourage you to refer to the news release and Constellation's SEC filings for risk factors that may impact forward-looking statements made on this call. Before turning it over to Nick to kick things off, please keep in mind that, as usual, answers provided today will be referencing comparable results unless otherwise specified.

Lastly, in line with prior quarters, I would ask that you limit yourself to one question per person, which will help us to end our call on time. Thanks in advance, and now over to you, Nick.

Thanks, Blair. Good morning, everyone. Before we get into the Q&A, I want to take a minute, for those of you who may not yet have had a chance to read our posted commentary, to summarize a few key takeaways from this quarter's results, which beat our expectations. First, we are reiterating our fiscal 2027 guidance, including comparable EPS of $11.20 to $11.90 per share. If the positive September trends that we saw continue, we would expect to land at the high end of that range. Second, our increased investments and focus on marketing are working. We were the number one dollar share gainer in beverage alcohol this quarter. Our beer business outperformed and accelerated meaningfully quarter-on-quarter. Pacifico became a top 10 beer brand with a very long distribution runway ahead of us. We're significantly outperforming the industry, and we are seeing marketing-driven green shoots across the board.

Finally, our inventory levels are healthy. We have spent much of the first half rebuilding distributor inventory levels, and while there is always going to be month-to-month variability, September depletions are turning in the right direction. Days on hand remain lower than our long-term average, and we entered the third quarter in a much better position. We feel good about where we are for the first half, and this entire team is incredibly focused on executing from here. With that, operator, let us please open the line for questions.

Sure Nick, happy to try to unpack that. And, yeah, just start by saying we feel really good about the trajectory, given the results in the first half and the trends in September. Which is why we expect now to come in at the high end of the guide should those trends continue. Now, you are absolutely right. There was timing, Labor Day timing between August and September this year. We saw that shift, but a lot of that timing was offset by an extra sell day in Q2. So think of Q2 as neutral, and we actually saw non-timing related acceleration in the month of September as our college football and other programming took place. And we are seeing a very healthy response to that. So at this point, we feel it would be a real reversal in trends for us to contemplate the low end of the guide.

There's nothing we're seeing today on either the top line or the bottom line to indicate that things are going in that direction. That said, we do want to continue to be prudent in our assumptions and forecasts, and we are just unbelievably focused on delivering for our shareholders. That's just going to come back to our evolved focus on marketing, our enhanced execution, discipline, and pushing the organization to continue to deliver. Garth, I don't know if you have any color to add.

No, Nick, I mean, I think as you said, we feel good about how we've delivered the first half and Q2. We are confident on where we sit for the rest of the year. As we look at Q2 and we think about, had we not shipped to the levels we did to rebuild inventories, if we hadn't done that, we still would've come in above our expectations for the quarter.

That's what gives us confidence that we're in a good position to deliver on the rest of the year, and as you said, if September trends continue to be at the high end of the guidance range.

Thanks very much. Sure, Peter, happy to do that, and Garth, feel free to add in some color.