Penfolds owner shares plunge on earnings downgrade
The owner of luxury wine brand Penfolds said the key US and Chinese markets continue to face major challenges and no recovery is expected in the near term.
Treasury Wine Estates chief executive Sam Fischer, who took the top job in October, conveyed the bleak outlook in an update to investors on Wednesday.
Some of these disruptions have previously been attributed to changing consumer habits and economic conditions, which have negatively impacted demand and competition in the luxury wine industry.
“Category dynamics have weakened in recent months, particularly in the US and China, and recovery is now unlikely to occur in the near term,” Mr Fischer said.
As a result, Treasury Wine said its inventories in China and the US were above “optimal” levels and that hundreds of thousands of cases would decrease.
He also acknowledged ongoing price cuts on Penfolds wines in China, where a gray market is redirecting bottles to places like Singapore or Hong Kong.
The company has restated its first-half earnings forecast to $225-235 million, although it expects the second half of 2025/26 to be higher than the first half.
This would be below the $391 million in earnings before interest and tax announced in the previous first half of 2024/25.
RBC Capital Markets analyst Michael Toner said the new guidance was a “significant omission” and was about 30 percent below market consensus.
The company’s shares fell 11 percent to $4.88 after exiting a trading halt called ahead of an investor update on Monday.
Treasury Wine has also flagged plans to cut costs by up to $100 million a year, but the benefits aren’t likely to start flowing until fiscal 2027.
“Backed by these changes and strong business fundamentals, TWE is confident that it will be well positioned to deliver sustainable, profitable growth,” Mr Fischer said.
Two years ago, Treasury Wine paid $1.6 billion to acquire California luxury winemaker DAOU Vineyards, whose portfolio spans five product tiers ranging from $20 to $500 per bottle.
The value of its overall business in the US was recently reduced to $687 million.
The decline in wine consumption in Australia, China and the US has previously been linked to cost-of-living issues and consumer health preferences.
But Treasury Wine said “premiumization” was still relevant as consumers were “drinking less but better”.
Treasury Wine also confirmed the cancellation of a $200 million share buyback after raising $30.5 million earlier this year.
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