Penfolds earnings will slow next year, warns Treasury Wine

Treasury Wine, whose shares have slumped 35 per cent in the last 12 months, has now warned its rock star wine label Penfolds will suffer a marked slowdown in earnings.

The Penfolds wine label generates 58 per cent of Treasury Wine’s annual earnings.

Treasury Wine Estates has warned its star performer and the key driver of the company’s market value, iconic luxury wine Penfolds, will suffer a significant slowdown in its earnings as it looks to rebuild in China, while volatile economic conditions and nervous consumers in the US are impacting wine sales.

Its former blockbuster commercial wine, 19 Crimes, whose brand ambassador is US rapper Snoop Dogg, has also failed to maintain early success, with its sales now below expectations.

The winemaker also unveiled a restructuring plan for its cheaper, commercial wines into a new division called Treasury Collective to help arrest slowing sales, and said it will launch a share buyback of up to 5 per cent of its issued capital as it believes its sagging share price doesn’t reflect the true value of the company.

The new operating model that includes the new Treasury Collective arm will start from July 1 this year.

Some analysts had anticipated the earnings slowdown for Penfolds, while the market was also comforted by Treasury Wine on Tuesday reconfirming its most recent profit outlook for 2025, and shares in the winemaker opened stronger in morning trade, rallying more than 5 per cent to $8.57. It is likely the announcement of the share buyback has also supported the share price on Tuesday.

It comes as only this month Treasury Wine, which also makes Pepperjack and Lindeman’s, suffered a major setback in its grand ambitions to forge a thriving premium wine business in the US after its key distributor in California – which generates one quarter of its North American sales – decided to pull out of the Golden State. This, along with tougher trading conditions in the US, saw Treasury Wine warn in early June that it expected 2025 earnings to be approximately $770m, with the variance to the previously provided outlook of ‘approximately $780m’ driven by lower than expected premium wine portfolio shipments in the US.

Outgoing Treasury Wine boss Tim Ford has warned of slowing sales at Penfolds wine. Picture: Aaron Francis / The Australian

Adding to those ills are now a weakened earnings trajectory for Penfolds. Much of the value in Treasury Wine’s market capitalisation is also delivered by the Penfolds arm which traditionally generated the bulk of the company’s wealth. The Penfolds wine label generates 58 per cent of Treasury Wine’s annual earnings.

The dip in earnings for Penfolds was factored in by some analysts and the market however, as Penfolds reinvests in the wine label ahead of a rise in Penfolds supply into the second half of 2026.

In a trading update and investor day on Tuesday, outgoing Treasury Wine chief executive Tim Ford said the Penfolds wine business was now expecting low to mid double-digit earnings growth for fiscal 2026, revised from previous target of “approximately 15 per cent”. This weakened profit growth included increased sales and marketing overhead investment ahead of the second half of 2026.

It comes as Treasury Wine also announced on Tuesday the restructure of its struggling commercial wine portfolio with a new division called “Treasury Collective” to house its cheapest wines such as 19 Crimes, Matua, Squealing Pig and Wynns. These wines within Treasury Collective have an average net sales revenue per case of $68 and earnings margins of 10 per cent, compared to its Penfolds division which has net sale revenue per case of $373 and earnings margins of 45 per cent.

Treasury Wines said top-line sales declines for wines within its Treasury Collective pillar should moderate in fiscal 2026.

In Treasury Americas, the pillar that sells wine in the US and also houses a portfolio of Californian wine producers, economic uncertainty and weaker consumer demand has been reflected in declining wine consumption trends, it warned.

The softening was more pronounced at the below US$15 price points.

In the US luxury portfolio, its recently acquired DAOU wine brand was expected to deliver low double-digit nest sales growth, in line with the medium-term target. The performance of other parts of its cheaper wine portfolio was below expectations, particularly for 19 Crimes, leading to lower shipments in the fourth quarter.

The winemaker will conduct a 5 per cent share buyback this year which is about s $327.4m worth of shares at Treasury Wine’s last close of $8.07 for up to 40.6 million shares. The winemaker said the buyback reflected the board’s belief that the company’s shares are materially undervalued.

Shares in Treasury Wine have slumped 35 per cent in the last year.

Originally published as Penfolds earnings will slow next year, warns Treasury Wine