Why Is TWE Withdrawing Its Growth Guidance for Penfolds and Treasury Americas?
Treasury Wine Estates has withdrawn its fiscal 2026 EBIT growth guidance following softer-than-expected Penfolds sales in China and distribution disruptions in California, signaling a cautious outlook for its key markets.
- Penfolds shipments in China underperform, prompting withdrawal of EBIT growth guidance
- Treasury Americas faces uncertainty from distributor exit in California impacting shipments
- Treasury Collective stable globally but US shipments affected by distribution transition
- Group-level EBIT growth guidance for F26 withdrawn amid market uncertainties
- On-market share buy-back paused pending clearer trading conditions
Penfolds Faces Headwinds in China
Treasury Wine Estates (TWE) has revealed that Penfolds, its flagship wine brand, is experiencing softer-than-expected demand in China, a key growth market. Despite a solid start to the fiscal year with shipments aligning to expectations globally, evolving consumption patterns and a decline in large-scale banqueting occasions have dampened sales. Preliminary data from the critical Mid-Autumn Festival period suggests that Penfolds depletions remain below plan, leading TWE to withdraw its previous guidance of low to mid double-digit EBIT growth for fiscal 2026 and approximately 15% growth in fiscal 2027.
Distribution Disruption Hits Treasury Americas
In the Americas, Treasury Wine Estates is grappling with the fallout from a major distributor transition in California. The exit of Republic National Distribution Company (RNDC) and the onboarding of Breakthru Beverage Group have disrupted shipments and depletions, particularly in the first quarter. While the portfolio outside California is performing well, the uncertainty surrounding the treatment of approximately A$100 million in inventory held by RNDC complicates the outlook. Ongoing negotiations aim to mitigate financial impacts, but TWE has withdrawn its modest EBIT growth guidance for Treasury Americas in fiscal 2026 due to these challenges.
Treasury Collective’s Mixed Performance
Treasury Collective, TWE’s portfolio of emerging wine brands, delivered results in line with expectations in Australia and Europe, the Middle East, and Africa (EMEA). However, US performance was affected by the Californian distribution transition, with shipments reduced in the first half of fiscal 2026. As a result, earnings before interest, taxes, and share-based payments (EBITS) delivery is expected to be weighted towards the second half of the year, highlighting the ongoing operational adjustments within the group.
Group Outlook and Capital Management
Given the uncertainties in its key segments, TWE has concluded that maintaining its group-level EBIT growth guidance for fiscal 2026 is no longer appropriate. The company has also paused its on-market share buy-back program, which had completed 15% of the planned A$200 million by the end of September, until there is greater clarity on trading conditions. Despite these setbacks, TWE emphasizes its strong liquidity position, with approximately A$1 billion available and significant headroom under its borrowing covenants, providing flexibility to navigate the current challenges.
As TWE prepares for its Annual General Meeting on 16 October, investors will be closely watching how the company manages these headwinds and whether it can restore momentum in its core markets.
Bottom Line?
TWE’s cautious reset on growth guidance underscores the fragility of key markets and the critical importance of distributor relationships going forward.
Questions in the middle?
- How will TWE’s negotiations with RNDC resolve the inventory and financial impact in California?
- Can Penfolds regain momentum in China amid evolving consumption trends and regulatory pressures?
- What strategies will Treasury Collective deploy to accelerate US market recovery in the second half of fiscal 2026?
