Treasury Wine bets on Penfolds-led luxury push to revive fortunes, shares soar 13%

By Rajasik Mukherjee and Nikita ‌Maria Jino

June 4 (Reuters) - ​Australia's ​Treasury Wine Estates said on Thursday it will double down on a handful of brands led by the iconic luxury Penfolds, and review its ‌Americas business as part of a new strategy to bolster profits ⁠and prop up its falling share price.

Shares of the country's top standalone winemaker surged 13% to A$4.66 ‌in their best session in ‌six weeks, while the broader benchmark fell 1.1%.

At its Investor Day briefing, Treasury Wine said it would reduce its number of brands to fewer than 30 over ​the next five years from the current 76, aiming to earn 90% of its net sales from these brands, compared with the present 68%.

Its portfolio will ⁠be divided into luxury "Power Brands" and "Regional Heroes". The "Power Brands" will include global names like DAOU and Penfolds, while "Regional Heroes" ​will be made up of local brands like Squealing Pig and Pepperjack.

"The clearer commitment to divest to only 10 key brands and ​simplify is giving management a target to be ‌held accountable to, which is more encouraging than past uncertainty," said Cameron Curko, CIO at Pitcher Partners.

The review of its Americas ⁠business, beset by excess supply-chain capacity and elevated inventory levels, may result in a divestment of certain brands and wineries alongside vineyards.

The division has been a drag on group performance recently, ⁠hit by softer U.S. wine demand and disruptions stemming from changes to its distribution network. The segment ​also flagged a A$687.4 million ($490.12 million) asset writedown last year.

Citi analysts said the review would be "music to the ears of many shareholders".

Treasury Wine is targeting cost savings of about A$100 million a ‌year from a revamped operating model and a supply-chain overhaul. The company expects this to help it aim at revenue growth ‌from fiscal 2028.

The winemaker expects operating earnings of A$480 million-A$490 million in fiscal 2026, ahead ⁠of a Visible Alpha consensus estimate ‌of A$451.4 million. It ​also sees earnings for fiscal 2027 to be at least equivalent to 2026.

($1 = 1.4025 Australian dollars)

(Reporting by Rajasik Mukherjee in Bengaluru; Editing by ‌Subhranshu Sahu)

---

Serious News for Serious Traders! Try StreetInsider.com Premium Free!

---

You May Also Be Interested In

• Morgan Stanley upgrades Robinhood, sees 43% upside
• Citi raises Atlassian price target to $225, maintains Buy rating
• New foreign investment in Mexico stalls as companies fret over USMCA uncertainty