- Winemaker reviews troubled Americas business
- To slash number of brands to fewer than 30 from 76
- Eyes cost savings A$100 million/year
- FY26 operating earnings forecast beats Street view
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
Source: Reuters