Treasury Wine Estates flags lower earnings as drinkers shy away from cheap wine
Treasury Wine Estates has reported a 50 per cent earnings plunge for its cheap wine division as consumer demand for its budget plonk — starting at just $6 a bottle — softens.
Earnings for Treasury Premium Brands fell 49.9 per cent to $22.9 million in the first half of the financial year, which the group said reflected softness in consumer demand for wine at lower price points.
The division comprises the Snoop Dogg-backed 19 Crimes, Squealing Pig, Pepperjack and Wolf Blass labels.
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By continuing you agree to our Terms and Privacy Policy.TWE now expects full-year earnings to hit about $780m, which is at the lower end of previous guidance of between $780m and $810m, driven primarily by reduced expectations for the premium brands business.
But growing sales for the high-end Penfolds wines and the recently acquired Californian wine operation DAOU Vineyards countered the weakness in Premium Brands.
TWE on Thursday reported a 19.6 per cent increase in half-year revenue to $1.57 billion as net profit lifted 32.5 per cent to $220.9m. It declared an interim dividend of 20¢ a share, up from 17¢ a year earlier.
Penfolds’ earnings grew 33.9 per cent to $250.2m, bolstered by the re-entry into China after onerous tariffs of as much as 200 per cent on bottled Australian wine exports were removed.
Treasury Americas reported a 70 per cent increase in earnings to $155.3m, driven by DAOU, which was acquired in December 2023.
“We are extremely pleased to have successfully re-established the Penfolds Australian country of origin portfolio in China, with positive consumer and customer sentiment and key performance signals very clear,” said chief executive Timothy Ford said.
“The progress we have made integrating DAOU and Treasury Americas to create the leading supplier of luxury wine in the US market is also pleasing and we look forward to further capitalising on this opportunity in the year ahead.”
The company also revealed it would abandon plans to divest its lower-end labels Wolf Blass, Yellowglen, Lindeman’s and Blossom Hill.
“TWE has concluded that the offers received for these brands did not represent compelling value and therefore their retention is the best course of action,” it said.
Shares were down 4 per cent to $10.70 in early trade.
UBS analyst Shaun Cousins said the earnings guidance downgrade was disappointing but somewhat reflected in the share price.
