TWE’s Distributor Shakeup and Market Risks Shadow Luxury Growth Ambitions

Strong Fiscal 2025 Performance Anchored by Luxury Brands

Treasury Wine Estates (TWE) has provided a confident update on its business outlook, forecasting earnings before interest, tax, and significant items (EBITS) of approximately AUD 770 million for fiscal 2025 (F25). This represents a robust 17% increase on the prior corresponding period, largely fueled by the continued strength of its luxury wine brands Penfolds and DAOU.

Penfolds, in particular, is expected to deliver low double-digit EBITS growth, supported by strong demand in Asian markets, notably China, where the re-establishment of the Australian country of origin portfolio has revitalized sales. DAOU, part of the Treasury Americas luxury portfolio, is also contributing to growth despite broader economic uncertainties in the United States.

Luxury Portfolio-Led Model and New Divisional Structure

Looking ahead to fiscal 2026 (F26), TWE will shift to a luxury portfolio-led divisional operating model, introducing a new global premium division named Treasury Collective. This strategic realignment aims to sharpen focus on luxury brands, driving sustainable growth and improved returns. The company anticipates continued net sales revenue (NSR) and EBITS growth, with Penfolds expected to achieve low to mid double-digit EBITS growth, bolstered by increased marketing investments in Asia ahead of additional wine availability in the second half of F26.

While Treasury Americas’ luxury portfolio is forecast to grow modestly amid economic headwinds and softer U.S. consumer demand, Treasury Collective is expected to experience top-line declines that will moderate as the division moves toward medium-term stabilization.

Capital Management and Share Buyback Initiative

Reflecting confidence in its luxury-led strategy and financial strength, TWE announced plans for an on-market share buyback of up to 5% of issued capital, to be unveiled alongside its full F25 results in August. The buyback underscores the Board’s view that the shares are materially undervalued and will be executed within the company’s established capital management framework, which targets a leverage ratio of approximately 2.0x.

TWE’s capital management approach balances sustainable shareholder returns with investment in long-term growth, maintaining an investment-grade credit profile and strong operating cash flow. The company expects to sustain free cash flow generation in F26, supporting the buyback while preserving financial flexibility.

Risks and Market Dynamics

Despite the positive outlook, TWE cautions investors about several risks, including the imminent distributor change in California following RNDC’s exit, inflationary pressures, tariffs, shifting consumer preferences, and geopolitical uncertainties. The company plans to provide further updates on these factors, particularly the California distribution transition, with its F25 results announcement.

Overall, TWE’s update signals a strategic pivot to luxury-led growth, leveraging its premium brand portfolio and global market positions to navigate a complex and evolving wine industry landscape.