Penfolds earnings will slow next year, says owner Treasury Wine Estates

Treasury Wine says its rock star wine label Penfolds will have a marked slowdown in earnings. But don’t expect to see the iconic red caps in the bargain bin.

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

Treasury Wine Estates boss Tim Ford has drawn a line in the sand on price for his flagship luxury brand Penfolds despite weaker demand, including for its top-tier Grange and Bin 707 bottles, as the winemaker navigates an increasingly volatile global wine market.

Its iconic Penfolds Grange was a surprising source of softness but there would be absolutely no fire sale of Penfolds wine, he said.

Mr Ford, who is departing as chief executive, pledged an on-market share buyback of 5 per cent of the group’s issued capital – as much as $327m – despite some analyst concerns that expected weaker Penfolds earnings in 2026 and slowing global wine consumption would depress its balance sheet.

Unveiling a restructure of its cheaper wine portfolio on Tuesday which will go into a new division called “Treasury Collective”, the winemaker also warned of weaker sales in the US market and for its former 19 Crimes label promoted by US rapper Snoop Dogg.

Penfolds Grange is experiencing slower demand, but don’t expect a price cut.

Mr Ford, who departs in late October, said the Penfolds wine business was now expecting low to mid double-digit earnings growth for fiscal 2026, revised from a 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. Penfolds will spend as much as $10m on staff and marketing in China, and seek to rebuild shipment volumes into the rest of Asia.

While discounts have been ubiquitous in the commercial wine market, there would be “no price adjustment whatsoever” for the best known brand.

“We won’t be adjusting our prices for fiscal 2026,” Mr Ford told analysts in an investor briefing.

‘’I think we have shown over time we are sticking to the course on pricing structures … we certainly believe we have got the pricing right. No price adjustment whatsoever.”

Outgoing Treasury Wine Estates chief executive Tim Ford. Picture: Aaron Francis

Some analysts had anticipated the earnings slowdown for Penfolds, while the market was also comforted by news of its share buyback which cushioned any Penfolds disappointment.

Shares in Treasury Wine, down 35 per cent over the past year as it downgraded earnings and experienced a slide in demand for its commercial wine (priced below $US15 a bottle), closed slightly weaker on Tuesday at $8, down 7c.

Outspoken Bank of America analyst David Errington, who has been covering the winemaker for more than 20 years, raised concerns that Treasury Wine could be forced to repurchase and destroy unwanted wine which could put pressure on its balance sheet and constrain its ability to buy back shares.

“I like buybacks but only when the company has done something good like sold a division or got excess franking credits,” Mr Errington told Mr Ford at the briefing. “You have huge troubles ahead in the US … with so much uncertainty at the moment I just wonder why do you believe your cash flow is going to be that good next year that you can allow yourself to do a buyback?” Mr Errington asked management on the analyst briefing.

Mr Errington also reminded the Treasury Wine CEO and CFO that in the past, the winemaker had resorted to ‘factoring’ (selling debt at a discount for a quick sugar hit of cash) to improve cashflows and leverage, and he hoped this would not happen again as its balance sheet was stretched into 2026.

Penfolds is expected to have a slowdown in earnings during 2026. Picture: Naomi Jellicoe

In response, chief financial officer Stuart Boxer said the winemaker would balance the opportunity of buying back its stock if the board believed it was trading below fair value and it was a “good use of capital”.

He pledged that Treasury Wine wouldn’t use any “special tricks” like factoring to pump up cashflow to pay for the buyback.

This month, tougher trading conditions and the decision by its key Californian wine distributor to pull out of that market resulted in Treasury Wine downgrading 2025 earnings to be approximately $770m, from the previously provided outlook of “approximately $780m” driven by lower-than-expected premium wine portfolio shipments in the US. That guidance was reconfirmed.

In the update on Tuesday there were other concerns from analysts about the easing of demand for Penfolds Grange and another top-tier Penfolds label, Bin 707, but Mr Ford said that although there was “some softness”, it wasn’t a case of excess inventory and there was no need for a price response.

He said its planned investment in people and the brand should help continue to grow the Penfolds label.

As part of the restructure of its struggling commercial wine portfolio, “Treasury Collective” will house its cheapest wines such as 19 Crimes, Matua, Squealing Pig and Wynns.

Originally published as Penfolds earnings will slow next year, says owner Treasury Wine Estates