Treasury Wine Estates (ASX: TWE) shares plunged 17% to a fresh 11-year low of $4.57 after the global wine group flagged weaker-than-expected first-half earnings, with analysts pointing to a material downgrade driven largely by the Americas.
RBC Capital Markets analyst Michael Toner described the update as a “significant miss”, estimating Treasury Wine’s 1H26 guidance was around 30% below expectations, with the Americas division missing by about 50%.
“We are currently experiencing category weakness in the US and China, two of our key growth markets, which will impact our business performance in the near-term. Maintaining the strength of our brands and the health of their respective sales channels is of critical importance to our Management team and our Board as we navigate through the current environment," TWE’s CEO Sam Fischer said.
“TWE is a high-quality business with strong foundations in place for sustainable, profitable growth. Our powerful portfolio of brands, leading market positions in attractive growth markets, unparalleled supply chain and highly engaged, capable team are all considerable strengths that position us strongly to deliver sustainable, profitable growth over the long-term.
“I’m energised by the opportunity to accelerate a transformation agenda to reshape TWE for its next era, leveraging these strong foundations. We have commenced work to identify opportunities to simplify the way we operate, to strengthen our execution focus right across the business and to realise significant cost benefits. I look forward to providing our investors with updates on our progress over coming months.”
Category weakness in US and China drives reset
The sell-off followed Treasury Wine’s investor update and 1H26 outlook, which outlined deteriorating category conditions in key markets, particularly the US and China, alongside strategic actions aimed at protecting brand equity and resetting inventory levels.
The company said wine category dynamics have weakened in recent months, with near-term improvement now considered unlikely. As a result, depletion growth expectations have been moderated, leading to elevated customer inventory levels in both the US and China. In China, parallel import activity has also disrupted pricing for Penfolds, Treasury Wine’s flagship luxury brand.
Treasury Wine expects group EBITS for 1H26 to be in the range of $225 million to $235 million, with second-half earnings forecast to exceed the first half. The outlook excludes any potential benefit from a settlement with former US distributor Republic National Distributing Company.
Penfolds: inventory reduction and parallel import clampdown
Penfolds remains the group’s key earnings contributor, with depletions growth continuing in core markets led by Bin 389 and Bin 407. However, performance in the ultra-luxury segment has fallen short of expectations amid broader weakness in global fine wine markets.
In China, Penfolds depletions rose 21% in the three months to October, though Treasury Wine said growth is now expected to be lower than its original FY26 operating plan due to reduced large-scale banqueting activity.
To address elevated distributor inventory and protect brand integrity, the company plans to reduce China distributor inventories by around 0.4 million cases (about $215 million in net sales revenue) over a 2-year period from 2Q26. Shipments contributing to parallel imports will also be significantly restricted.
Penfolds 1H26 EBITS is expected to be approximately $200 million, with earnings broadly balanced across the year.
Americas: California disruption and slower depletions
The Americas division emerged as the key pressure point. Luxury wine market trends in the US have moderated, with the category declining 2.4% over the latest 26 weeks, driven largely by weakness in California. Treasury Americas depletions are down 4.6% year-to-date, despite growth outside California.
Distributor inventory outside California has been assessed as around 0.3 million cases above optimal levels, prompting a planned 2-year inventory reduction program.
Treasury Americas 1H26 EBITS is expected to be about $40 million, impacted by the Californian distribution transition and inventory actions, with stronger earnings anticipated in the second half.
Negotiations with RNDC are ongoing, with no change to the previously disclosed potential $100 million impact to FY26 net sales revenue linked to remaining California inventory. The revised shipment profile is also expected to reduce the run-rate benefit from DAOU synergies in FY26 to about US$20 million, down from US$30 million previously.
Treasury Collective: tariffs to bite, US premium remains weak
Treasury Collective continues to perform in line with expectations in Australia and EMEA, though the US premium wine segment remains in decline. US tariffs on Australian and New Zealand wine are expected to reduce Treasury Collective EBITS by about $10 million, net of pricing actions.
Balance sheet: leverage rises, buyback cancelled
Treasury Wine expects leverage to rise to around 2.5 times at 1H26, remaining above its 1.5–2.0 times target range for approximately 2 years as it works through rebalancing customer inventories.
The company has cancelled its on-market share buyback of up to $200 million (with $30.5 million completed in 1Q26) and flagged a review of dividends, potential non-core asset sales and planned capital investment.
New CEO Sam Fischer said Treasury Wine was responding decisively to near-term market challenges while positioning the business for long-term growth through a company-wide transformation program, TWE Ascent.
The program targets $100 million per annum in cost improvement, with initial benefits expected to commence in FY27 and full realisation over a 2–3 year period.