Treasury Wine Estates has adjusted its economic forecast for the current 2026 financial year following softer-than-expected Penfolds sales in China along with challenges associated with its recent US distribution transition.
According to the producer, shipments to China have been in line with expectations, but there has been “softness in depletions throughout June and July as a result of evolving consumption dynamics within the alcohol sector, with large-scale banqueting occasions particularly impacted.”
While August depletions “showed some improvement,” TWE notes that the recently-completed Mid-Autumn Festival period would provide a clearer outlook of the expected performance of Penfolds in China over the remainder of the financial year. This data is pending, however, the preliminary results suggest that, even though depletions grew in September when compared with the pcp, the group will be unable to achieve its targets for the 2026 fiscal year at the current rate.
“Given the uncertainty that remains as to the outlook, TWE is not in a position to provide revised guidance at this point in time,” it wrote in a statement to shareholders this morning.
SImilarly Treasury Americas sales have been impacted by the transition to Breakthru Beverage Group as its new exclusive distributor in California following the news that Republic National Distributing Company would be ceasing all operations in September.
Excluding California, depletions were up more than 5 per cent, driven by DAOU, Frank Family Vineyards and Stags’ Leap. However, within California, where all three of these wines are made, sales performance has been impacted by the transition.
TWE told shareholders: “The net financial impact from the Californian distribution change remained uncertain, however it could advise at that point in time that it expected an adverse impact to Treasury Americas’ F26 operating plan NSR of approximately AUD $50 million.”
The distributor also told shareholders that the impact to Treasury Americas’ overall net sales revenue and earnings will remain unclear until transition planning and exit negotiations with RNDC in California are completed.
A number of factors are being discusses as part of these ongoing negotiations, including the treatment of the remaining inventory currently held by the former distributor, which has a potential net sales revenue value of $100 million and includes the 0.2 million case excess of shipments to depletions in California previously disclosed by TWE in August.
As a result of this change in forecast, TWE has paused its $200 million share buyback originally announced as part of its Financial Year 2025 results in August “until there is greater clarity around trading conditions and expectations.”
Since being announced this morning, the news has contributed to Treasury Wine Estates’ share value on the ASX plummeting more than 12 per cent to its lowest price in 10 years.
The company concludes: “TWE retains a strong and flexible capital structure, with approximately $1 billion of liquidity currently on hand and with significant headroom to the financial covenants under its borrowing arrangements.”
