Treasury Wine Estates Shares Plunge 56% in 2023 as Earnings Forecast Slashed by 40%

Treasury Wine Estates, one of Australia’s largest wine producers and the owner of brands such as Penfolds, Lindemans, and Beringer, is launching a major transformation program in response to declining demand in its two most important export markets, the United States and China. The company’s new chief executive, Sam Fischer, who took over in October, announced the changes after Treasury’s shares fell to their lowest level in a decade following a business update on December 17.

The company has canceled a planned A$200 million share buy-back and warned investors that earnings for the six months ending December 31 will be between A$225 million and A$235 million. This is about 40% lower than last year and 30% below market expectations. The share price dropped by 17% after the announcement, closing at A$4.98, down nearly 56% so far this year.

Fischer said Treasury is facing “category weakness” in both the US and China, which are key growth markets for the company. He emphasized that protecting the strength of Treasury’s brands and maintaining healthy sales channels are top priorities as the company navigates these challenges. The transformation program, called TWE Ascent, will focus on reviewing the product portfolio, changing the operating model, and optimizing costs. The goal is to achieve annual cost savings of A$100 million over the next three financial years.

In the US, Treasury has been hit by slowing demand for luxury wines—those priced at $20 or more per bottle—which have declined by more than 2% over the past six months. The company’s overall depletions in its Americas division are down 4.6% year-to-date. Outside California, depletions are up slightly, but within California they have suffered due to a recent distributor transition from RNDC to Breakthru. Distributor inventory outside California is currently about 300,000 cases above optimal levels and will be reduced over two years.

Treasury also recently forecast an impairment of at least A$687.4 million on its US assets earlier this month. The company’s lower-priced Treasury Collective brands have underperformed as well, with retail sales in the $8-$20 category down 6.6% in the last six months and Treasury’s own portfolio down 13.7%. As a result of these pressures, profit expectations for the first half of the fiscal year have been lowered for both Treasury Americas and Treasury Collective units.

In China, Penfolds depletions rose by 21% in the three months to October, but overall growth is expected to be lower than previously planned due to reduced large-scale banqueting activity. Treasury plans to cut distributor inventories in China by 400,000 cases—worth about A$215 million in net sales revenue—over two years. The company is also restricting shipments that contribute to parallel import activity in China to protect its brand from counterfeiting and gray market sales.

Fischer said that while current market conditions are challenging, he believes Treasury has strong foundations for long-term growth thanks to its powerful portfolio of brands and leading positions in attractive markets. He said work has already begun to simplify operations and strengthen execution across the business.

Outside its two main export markets, Treasury’s performance has held up better in Australia, Europe, and the Middle East despite ongoing tariff headwinds. However, US tariffs on Australian and New Zealand wines are expected to reduce earnings by about $10 million after pricing adjustments.

The transformation program is expected to deliver initial cost benefits starting in fiscal year 2027 with full realization over two to three years. In addition to cost cuts and operational changes, Treasury is reviewing dividends, considering potential sales of non-core assets, and rethinking planned capital investments as it adapts to a more cautious outlook for global wine demand.