New Treasury Wine boss makes strong debut, but uncertainty reigns

09 April, 2014 by TheShout

By James Atkinson

Analysts remain divided about Treasury Wine Estates' prospects despite being impressed by CEO Mike Clarke's debut address to the market.

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Highlighting the disparity of views on TWE, the spread of analysts' earnings forecasts for the 2014-15 financial year ranges between $190 and $280 million, suggesting Clarke's address did little to quell the uncertainty surrounding the stock.

CIMB equities analyst Alexander Beer said Clarke's address highlighted that TWE was "now officially in turnaround mode". 

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In a note to investors, Beer said CIMB sees risk to the company's earnings growth next financial year, given Clarke's indication of a willingness to "invest ahead of the earnings curve" in implementing new strategy initiatives.

"TWE highlighted that 83 SKUs across the business was too many, and the 'tail' will be consolidated as part of a realignment in overhead costs into brand advertising and promotion," said Beer.

"We see risk that this process results in volume loss, particularly in ANZ, as TWE [store] facings are replaced with either private labels or competitors." [continues below]

Treasury Wine CEO Mike Clarke

Another analyst said the new strategy, which will also see TWE cut back on its trade spend, was "sensible but very long dated".

"He wants to build a sustainable and profitable sales base, but in the short term it sounds like very anaemic growth in this business, while he refocuses it," the analyst said.

Contrary to media reports suggesting Clarke had indicated he would sell off the company's US assets, a TWE spokesman today said the opposite is true.

"Mike is committed to retaining our US business, which he sees is an important platform for future growth," the spokesman said.

 

 

 

 

 

 

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