Better from here, STZ reports FQ2 on Thursday
The consensus expectations for Constellation Brands’ FQ2 results appear to reflect the challenges from the shutdown of production in Mexico for about a month. We are expecting depletions to be up 5% and shipments to be down 2%. There could be some differential in wine expectations depending upon the exclusion of the brands to be sold to EJ Gallo.
We don’t expect negative surprises in the results that would cause the shares to underperform over the next quarter. It is likely management has positive commentary on the Corona hard seltzer launch, the improvement of on-premise, and Mexicali, but not a new development. The setup is more bullish after the earnings report, with shipments catching up and depletions not held back by low inventory levels. We still YOY EPS growth in F2021 and EPS in F2022, beginning with $10. Constellation Brands remains a Best Idea Long.
Grocery spend continues to be basket driven (ACI)
Spending at grocery stores continued to be elevated according to IRI through the week ended September 13. Trips to the grocery store have been flattish while basket size remained some 10% higher YOY. Where the trips have been down the most, have been with shoppers who visited grocery stores several times a week, according to Nielsen shopper surveys. Frequent shoppers have consolidated trips while others have moved to online ordering.
Improving trends on-premise? (BUD)
According to BeerBoard, which tracks draft beer sales nationwide, 92% of draft-pouring establishments were open during its survey period of September 25-27. The second week in a row at that open rate, the highest since BeerBoard began tracking draft lines in May. Craft beer had 60% of tap handles nationwide, but only 37% of the total volume. The domestic beer had 26% of tap handles and 54% of volume. Imports had 14% of the tap handles and 10% of the volume. Nationwide beer sales volume has grown 13.5% over the September 11-13 weekend (two weeks) but is still down 35% compared to the same time as last year. Volume sales in nearly all of BeerBoard’s key states but one (MN -0.3%) have increased compared to the September 11-13 weekend while Florida grew 21.4%.
