Treasury Wine Estates (TWE) has provided an update on its performance to investors, downgrading its profit expectations. The announcement saw the company’s share price fall 11% to $4.88 after coming out of a trading halt. 

TWE said category dynamics had weakened in recent months, particularly in the US and China, with near-term improvement now expected to be unlikely and resulting in depletion growth expectations being moderated.

First-half FY26 EBITS are expected to be in the range of $225-$235 million, which is 30% below consensus expectations.

The company said second half EBITS are expected to be higher than first half, which was impacted by TWE’s California distribution transition.

Penfolds continues to deliver depletions growth in key markets, led by Bin 389 and Bin 407, which TWE said are performing well. However, the ultra-luxury tiers, while in growth globally, are performing below expectations, reflecting recent weakness in global fine wine markets.

In China, depletions grew 21% in the three-months to October, including through the mid-Autumn festival period. Depletions growth is expected to continue in China, albeit at a lower rate than the original FY26 operating plan, which was set prior to recent changes that have impacted the frequency of large-style banqueting, including a ban on Chinese public servants attending such events.

TWE said it will take action to reduce China distributor inventory holdings by approximately 0.4 million case over a two-year period commencing in the second quarter of FY26. It is also making moves to crack down on parallel imports (the grey market) and counterfeiting.

“Protecting the strength of the Penfolds brand is an absolute priority for us, and we are making a deliberate strategic decision to significantly reduce shipments that are contributing to products being in this channel,” CEO Sam Fischer said.

“The grey market is very formalised, quite developed, and you need to remain diligent in relation to how you control it … we’ve identified some areas that need to be reined in and we need to do it quickly.”

Luxury wine market trends have also continued to moderate in the US, declining 2.4% in the latest 26 weeks compared to the 3.5% growth reported in TWE’s June Investor Update, driven by market weakness in California.

TWE said Treasury Americas continues to deliver depletions growth outside of California (up 2.3% YTD). However, depletions performance in California has been weak, particularly in November, and has been exacerbated by the distribution changes in that state. Nationally, Treasury Americas depletions are down 4.6% YTD.

As a result of the above factors, near-term depletions growth expectations for Treasury Americas’ portfolio have been further moderated. Against this backdrop, distributor inventory holdings outside of California have been assessed as being above optimal levels by 0.3m cases and will be reduced over an approximately two-year period.

Negotiations with RNDC are continuing in relation to inventory and exit arrangements in California, with no change to the previously disclosed impact to FY26 operating plan NSR of up to $100 million related to the remaining inventory in that state.

Due to the revised shipment profile, TWE said the “recognition of DAOU synergies will also be impacted, with the run-rate benefit in FY26 expected to be approximately US$20 million, from US$30 million previously.

Treasury Americas’ first-half FY26 EBITS is expected to be approximately $40 million, impacted by the California distribution transition and commencement of customer inventory reduction initiatives, with second-half FY26 EBITS expected to be higher than the first half.

TWE said the Treasury Collective portfolio continues to perform in line with expectations in Australia and EMEA, led by growth and innovation brands.

However, US tariffs on wine produced in Australia and New Zealand are expected to impact Treasury Collective’s EBITS by approximately $10 million. Treasury Collective’s first-half FY26 EBITS are expected to be approximately $25 million, with second-half FY26 EBITS expected to be higher than first half.

New CEO addresses shareholders

New TWE CEO Sam Fischer addressed the challenges the company is facing during a shareholder and analyst call.

“To be honest, this is not the first market update I thought I’d be making as TWE’s incoming CEO,” he said.

“It is, however, one that is critical to ensure that we maintain the ongoing strength of our brands and the health of our sales channels as we navigate what is a challenging environment for the global alcohol category and the wine industry more specifically. Despite these conditions, it’s important to note that our key brands, including Penfolds, DAOU, Frank Family Vineyards and Matua remain in good health.

“TWE has incredible brands and world-class assets in the most revered wine regions globally. These are the very things that drew me to this position in the first place and why I remain extremely confident in our future. While it is clear we are facing some near-term challenges, I can assure you as your incoming CEO, we’re confronting these with discipline, transparency and a sense of urgency.”

TWE is implementing an organisation-wide transformation program, TWE Ascent, designed to position the business for long-term success and to realise material cost benefits.

The program is targeting $100 million per annum in cost improvement, with initial benefits commencing in FY27 and full realisation across a two to three-year time period.

How Fischer plans to set up TWE for future success

Fischer also shared his initial perspectives on where TWE is today and priority areas of focus that he believes will be critical to setting the business up for future success.

“I believe that premiumisation of the category is a structural trend that is here to stay,” he said.

“While there will always be short-term fluctuations, wine drinkers will continue to aspire for premium products and the drink less but better trend is one that I see continuing. TWE has a powerful brand portfolio, including world-class brands occupying leading market positions: Penfolds, DAOU, Frank Family, brands that are well positioned even in challenged markets.

“Our core geographies are the right places to be. Asia, particularly China, remains a significant long-term opportunity with Penfolds extremely well positioned. The US is the world’s largest luxury wine market, and we have an excellent portfolio. However, we need to drive stronger on-ground execution to realise our full potential. My observation is that we have an incredible supply organisation that gives us a powerful competitive advantage.

“Finally, I’ve been really impressed with the calibre of TWE’s team and workforce across all the markets I visited, including China and the US. It is a passionate, highly engaged and very capable organisation.”

However, Fischer said the company’s broader portfolio “needs streamlining”.

“There are pockets of growth opportunities in wine, and we need to ensure that the portfolio is appropriately targeted to meet consumers’ needs and to compete where we have the right to win,” he said.

Secondly, he said TWE will need to transform its operating model.

“Currently, we have an operating model that I would describe as complex with points of duplication,” he said.

“There is a real opportunity to simplify our structure and processes, reshaping how we work for optimal efficiency, agility and accountability. Through simplification and efficiency, we expect to deliver material cost savings.”

Thirdly, he plans to drive an elevated level of focus on depletions and tight inventory management to ensure that TWE retains healthy sales channels at all times.

Analyst calls for US withdrawal

Among the most vocal of the analysts during Fischer’s call was Bank of America’s David Errington.

“I’ve seen three TWE CEOs lose their job over the US I don’t want to see a fourth. Why are you committing to the US, why? Because to me, it sounds like the US is in real trouble because you don’t have the flexibility in the supply,” he said.

“You don’t have the capability of reducing inventory coming in. You’ve got fixed-term contracts, you’ve got vineyards that your own. This, to me, sounds like you’re going to have to basically do what you did in 2013 and buy back inventory, which is another layer of disappointment.

“What’s the game in the US, Sam? Because you’ve got a wonderful business in Penfolds. What’s the deal in the US? Why can’t — it’s just so frustrating, $40 million in a half, Sam, for luxury when you’ve paid $2 billion in the last three years on Frank Family and DAOU, $40 million. And then Treasury Collective, the US is going backwards in depletions going backwards so much. The exasperation of sticking with the US, I’ve covered this company for 30 years. You’ve never got the US right.”

Fischer responded saying the US was the largest luxury wine market in the world and reiterated that he was confident TWE had a strong future there.

“It’s genuinely been stable. Margins have been great. And if you’ve got a strong position that allows you to get a decent share of voice with distributors, then there’s no reason why through great execution, you can’t see consistent returns,” he said.