Treasury Wine Estates (TWE) has said it no longer believes it is appropriate to retain the guidance for its Penfolds business to deliver low to mid double-digit earnings growth in the 2026 financial year and approximately 15 per cent earnings growth in FY2027.
As part of its FY2025 results announcement TWE highlighted there had been softness in depletions throughout June and July as consumption trends change in China, in particularly around large-scale banqueting occasions.
In a performance update announcement to the ASX, TWE said: “While August depletions showed some improvement, TWE noted that the Mid-Autumn Festival period would provide a clearer outlook of the likely performance trends through the remainder of the year.
“Complete data for Penfolds performance through the key Mid-Autumn Festival period remains pending. However, whilst depletions grew in September compared with the pcp, preliminary data indicates that depletions remain weak relative to plan.
“If the performance trends indicated by the preliminary data continue through F26, Penfolds depletions targets for F26 in China are unlikely to be achieved.”
The company said several mitigation measures are underway, including reallocating product to other key markets while managing the risk of parallel imports into China.
TWE stressed that Penfolds’ fundamentals remain strong, underpinned by a diversified global footprint and continued investment in brand equity, distribution and consumer engagement. The business reaffirmed its commitment to maintaining pricing discipline across all markets to protect long-term brand strength.
There are also concerns around TWE’s distribution in the United States, where its portfolio continues to perform strongly outside of California, with depletions up more than five per cent year-on-year excluding the state. Growth was led by luxury brands DAOU, Frank Family Vineyards and Stags’ Leap.
In California, however, depletions and shipments were disrupted by the ongoing distributor transition following the closure of Republic National Distribution Company’s (RNDC) operations in the state on 2 September. TWE is in the process of transferring distribution to Breakthru Beverage Group.
TWE’s ASX announcement said: “Negotiations are ongoing between TWE and RNDC, including the most recent meeting on 10 October, with both parties seeking a practical solution. As part of these negotiations, TWE is considering a number of factors, including the treatment of the remaining inventory (A$100m NSR value) currently held by RNDC in California (which includes the 0.2m case excess of shipments to depletions in California, as disclosed in August).
“While optionality exists regarding the management of this inventory, there may be an additional impact to TWE’s F26 shipments and operating plan NSR, depending on what is ultimately agreed between TWE and RNDC.”
Given these developments, the company said it is no longer appropriate to retain its guidance for modest EBITS growth for Treasury Americas in FY26.
The Treasury Collective portfolio delivered results in line with expectations across Australia and EMEA during the first quarter. However, its US performance was also affected by the Californian distribution transition and by efforts to better align shipments with depletions across FY25 and FY26.
TWE expects Treasury Collective’s earnings to be weighted towards the second half of FY26, with approximately 60 per cent of EBITS delivery anticipated in that six months.
Looking ahead TWE said as a result of the challenges in China and the US it has withdrawn group-level guidance for FY26 EBITS growth.
The company confirmed that its on-market share buy-back program, has been paused after $30.5 million of shares were repurchased in the first quarter (around 15 per cent of the program).
TWE said the pause was a prudent step until there is greater clarity around market conditions and business performance.
Despite the near-term uncertainty, the company emphasised its strong balance sheet and liquidity position, with approximately $1bn in available liquidity and significant headroom within its borrowing covenants.