TWE pulls guidance as China and US markets weigh on outlook

Australian distributor Treasury Wine Estates (TWE) has withdrawn its earnings guidance for F26, citing weak trends in China and distribution upheaval in California. The announcement comes just days before its annual general meeting.

According to TWE’s ASX statement, while Penfolds 1Q26 shipments were in line with expectations globally, the company no longer expects to achieve its previously stated target of low to mid double-digit EBITS growth in F26 and approximately 15 % EBITS growth in F27.

TWE had already flagged in its F25 results on 13 August that depletions in China had softened throughout June and July due to evolving consumption dynamics within the alcohol sector, particularly affecting large-scale banqueting occasions. While August showed some improvement, early September data indicate that depletions remain below plan.

The company is now implementing measures to reallocate product to other key markets in a controlled way to protect pricing and brand equity. TWE said it is not in a position to provide revised guidance at this time.

“TWE remains committed to maintaining the long-term strength and equity of the Penfolds brand through pricing discipline across all markets,” the group stated.

Distribution challenges weigh on Treasury Americas

Treasury Americas is also facing headwinds, with TWE confirming increased uncertainty around its F26 guidance for modest EBITS growth. According to the company, depletions outside California grew by more than 5% year-over-year, driven by DAOU, Frank Family Vineyards, and Stags’ Leap.

However, performance in California was impacted by the ongoing transition from the former distributor, Republic National Distribution Company (RNDC), to Breakthru Beverage Group. Negotiations with RNDC continue, with the most recent meeting held on 10 October.

TWE previously indicated an expected adverse impact of approximately AU$50 million on Treasury Americas’ F26 operating plan net sales revenue due to the distribution change. The company is also managing the treatment of remaining inventory worth around AU$100 million net sales revenue currently held by RNDC in California.

While TWE continues to seek a settlement that mitigates the full EBITS impact, it acknowledged that “there is increased uncertainty that this will occur and therefore TWE no longer believes it is appropriate to retain the guidance for modest EBITS growth in Treasury Americas in the year.”

Treasury Collective stable but US performance lags

Treasury Collective’s 1Q26 performance was in line with expectations in Australia and EMEA. The US market, however, was also affected by the Californian distribution transition and a focus on aligning shipments to depletions across F25 and F26.

As a result of reduced US shipments through the first half, Treasury Collective’s EBITS delivery is expected to be weighted towards the second half of F26, at approximately 60 %.

Group-level guidance scrapped

Given the pressure on both Penfolds and Treasury Americas, TWE said it is no longer appropriate to retain its group-level EBITS growth guidance for F26.

The company also confirmed that its on-market share buy-back of up to AU$200 million will be paused until trading conditions are clearer. By the end of September, TWE had completed 15% of the programme, buying back AU$30.5 million worth of shares.

TWE retains a strong and flexible capital structure, with around AU$1 billion of liquidity on hand and significant headroom under its borrowing arrangements.

AGM set for Thursday amid investor scrutiny

TWE will hold its annual general meeting on Thursday, 16 October at 10.00 am (AEDT). The update is expected to draw investor questions on the outlook for China and California, both of which are critical markets for the group’s luxury strategy.

In market trading, the company’s shares were last quoted at around AU$8.11, according to MarketIndex.

The developments place TWE alongside other global drinks companies facing pressure from shifting consumer dynamics. In November 2023, Diageo issued an unscheduled trading update tied to weakness in Latin America, triggering share price declines across the sector, as reported by the drinks business.

As per its ASX statement, TWE reiterated that its long-term strategy remains centred on luxury leadership and disciplined execution, supported by what it described as a strong balance sheet, world-class brands and assets and exceptional people.

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