Treasury Wine Estates (TWE) has withdrawn its earnings guidance for the current fiscal year after its flagship brand Penfolds struggled with falling demand in China, a move that sent the company’s share price to its decade low.
Treasury’s shares slid 15 per cent to a closing price of $5.93 on Monday, the biggest drop since the Covid pandemic and the lowest point since September 2015.
In its statement, the company said Penfolds sales in China – one of its key markets – have been weaker than expected due to changing consumption habits and a drop in large-scale banqueting occasions.
Preliminary data shows that demand remained weak relative to plan during the key Mid-Autumn Festival period.
“If the performance trends indicated by the preliminary data continue through FY26, Penfolds depletions targets for FY26 in China are unlikely to be achieved.
“As a result, TWE no longer believes it is appropriate to retain the Penfolds guidance for low to mid double-digit EBITS growth in FY26 and approximately 15 per cent EBITS growth in FY27,” the company said.
In response, TWE has taken several measures, including reallocating products to select customers in other key markets, in a manner that minimises the risk of parallel imports back into the Chinese market.
The slump at Penfolds was not the only problem TWE has been facing. The company mentioned in the announcement that the performance of its Treasury Americas business has been impacted by the distribution transition in California.
The wine maker had to look for a new distributor in California after a key partner, Republic National Distributing Company (RNDC), said it would stop operating from September 2.
TWE expects the Californian distribution change to have an adverse impact on Treasury Americas’ FY26 operating plan of approximately $50 million. This reflects the difference in business plans under the distribution arrangement with RNDC and its new distributor, Breakthru Beverage Group.
“As a result of the uncertain outlook in relation to Penfolds and Treasury Americas, TWE has formed the view that it is no longer appropriate to retain its guidance for EBITS growth at a group level in FY26,” the company concluded in the statement.
The withdrawal of annual guidance was coupled with TWE’s decision to halt its share buyback plans.
The company announced in August it would carry out an on-market share buy-back for up to $200 million. The move came as it reported a 17 per cent increase in EBITS for FY25, primarily driven by strong growth in Penfolds.
However, only $30.5 million of shares had been bought back as of the end of September.
“As is appropriate and prudent, the on-market share buy-back will be paused until there is greater clarity around trading conditions and expectations,” the company said.
TWE will hold its annual general meeting this Thursday. The company is set to undergo a change in leadership this month, with CEO and MD Tim Ford to be replaced by Sam Fischer, former boss of spirits group Lion, on October 27.
