Constellation Brands told Wall Street on Tuesday night that beer net sales rose 5% in its fiscal second quarter, to $2.47 billion, and that it was keeping its full-year outlook. The stock fell about 5% after the bell anyway and was still down roughly 4.5% before Wednesday’s open. Most of the coverage stops at “beat on earnings, missed on depletions.” Nobody has lined the reaffirmed guidance up against the first half the company just finished. Do that and the outlook stops looking like a hold. Constellation is guiding beer net sales somewhere between down 1% and up 1% for the year, after a first half that ran up 4%. The only way both numbers are true is a second half that shrinks, and by our arithmetic from the company’s own filings it shrinks by somewhere between about 2.5% and 7%.
That is the number the after-hours sellers were pricing, whether or not they wrote it down.
Start with the gap everyone did notice. In the quarter ended August 31, beer shipments, the cases Constellation sells to its distributors, rose 5.5%. Depletions, the cases those distributors sell on to bars and stores, fell 0.6%. The earnings release Constellation filed with the SEC has both lines, a few rows apart. The six-point spread is beer that left the brewery and has not yet been bought by anybody holding a bottle opener.
Management has an explanation, and it is not a bad one. Distributors ran their inventories down below normal last year, when beer shipments fell 3.8% against a 2.1% decline in depletions, and the company says the second quarter refilled them to healthier levels going into the fall. Fine. A restock is a real sale. It is also a sale you only get to book once, and the company’s own recap more or less says the warehouse is now full.
Here is the math the coverage skipped. Fiscal 2026 beer net sales were $8,315.2 million. First-half fiscal 2027 beer net sales were $4,757.1 million, against $4,579.5 million a year earlier. Hold the full year to the guided range of minus 1% to plus 1% and the back half has to land between roughly $3.47 billion and $3.64 billion. Last year’s back half was about $3.74 billion.
So the guidance Constellation “reaffirmed” with a straight face is a forecast that beer revenue falls in the second half, from a quarter it is describing as share gains. Both things can be true. Constellation’s beer business was the biggest dollar share gainer in beverage alcohol, the company says, and it is gaining share of a category that is shrinking. Being the tallest guy at a party that keeps getting smaller is a real accomplishment. It is not growth.
The brand detail tells you where the drinkers went. Modelo Especial depletions fell about 2% and Corona Extra about 5%. Pacifico rose about 19%, Victoria about 15% and Modelo Chelada about 5%. The two flagships that built the company’s premium-import franchise are the ones losing volume, and the brands picking up the slack start from much smaller bases, so a 19% gain on Pacifico buys back far fewer cases than a 2% loss on Modelo gives away. Beer operating margin fell 160 basis points to 39.0% because Constellation spent more on marketing to hold its ground, even with tariff costs lower.
Then there is SpikedAde. Constellation paid $75 million upfront for the vodka-based ready-to-drink brand, with up to $278 million more over five years if it hits targets. Nearly four of every five dollars in that price is contingent. That is a company buying an option on a new category rather than a company that believes its core can grow on its own.
Our view: investors were right to sell, and Constellation should stop presenting shipment growth as the headline. The beer business has a demand problem in its two biggest brands, and a quarter of distributor restocking dressed it up as a 5% sales gain. Guide on depletions. Say plainly that the second half is down. Put a number on how much of the year’s share gains came from brands too small to replace Modelo’s lost volume.
Shares sat near $115.67 at Tuesday’s close, already down 16% this year.
The restock is done.
The drinkers are not back.
The next two quarters will show which of those numbers Constellation’s guidance was really about.