By James Atkinson
Aside from any marketing benefits, Treasury Wine Estates' decision to bring forward the Penfolds luxury release has the added bonus of stacking its earnings at a pivotal time for the business, points out CIMB analyst Daniel Broeren.
TWE this week foreshadowed a major promotion that aims to suck the remaining FY14 Penfolds release through retail channels to make way for the new release in October.
With deals already locked in with retailers in the final months of the 2014 financial year, CIMB analyst Daniel Boeren said TWE could now meet its FY14 guidance as well as being able to report the appearance of strong revenue momentum in early FY15.
"This should assist in maximising any further approaches from KKR in the near term, and buy management time to formulate and execute its turnaround," he said in a note to investors.
"We now forecast TWE will hit the bottom of its FY14 EBITS guidance range (A$190 million-210 million)."
Broeren welcomed the decision to alter the timing of the Penfolds release, which he said was in line with the desire of many international distributors that CIMB speaks to.
"The timing maximises sales when demand is highest, a positive for both net sales revenue per case and margin. As such, an accelerated sell-in of the FY14 release has supported 2H14 earnings."
Structural separation good in theory
Broeren said TWE's decision to separate its premium and commercial teams was "theoretically sound".
"Pure-play commercial wineries are FMCG businesses and need to be run as such," he said.
"However, the allocation of brands could be a risk. We are unsure where a brand like Wolf Blass would fit. This is a true middle-market brand that recruits in the commercial space and trades up into premium."
I don’t get an anlalyst thinking a early release of vintage wine all of a sudden makes a stock viable to investors. It’s a finite make, it’s not a can of Pal. Bringing it forward doesn’t create more profit, unless of course you use Clive Palmer’s abacus.