The owner of luxury wine brand Penfolds has cut its earnings guidance and is getting ready to wield the axe on costs as its key overseas markets continue to wobble.
Treasury Wine Estates chief executive Sam Fischer delivered the subdued outlook on Wednesday in an update to investors, prompting a sell-off that sent the company's share price to its lowest in years.
Some of the disruption has been previously linked to changing consumer habits and economic conditions, which have dented demand and slowed sales, alongside a thriving "grey" market in China.
"Category dynamics have weakened in recent months, particularly in the US and China, with near-term improvement now expected to be unlikely," said Mr Fischer, who stepped up in October.
As a result, Treasury Wine's inventories in China and the US are above "optimal" levels and will be cut by almost one million cases through reduced shipments over two years.
It also acknowledged ongoing price disruption for Penfolds wines in China, where a parallel market is operating as bottles are re-routed through places like Singapore or Hong Kong.
Mr Fischer said the grey market was quite developed and required ongoing vigilance to preserve prices and the formal wine distribution system built by Treasury.
"We have development markets in Southeast Asia and broader Asia, and in some instances in some of those markets it's possible that product can leak back into China," he told investors.
"It's not just our category (wine), all sorts of categories are exposed to the sophistication across the border and parallel into China.
"We've identified some areas that need to be reined in and I think we need to do it quickly."
The company has recast its first-half earnings guidance to $225-$235 million, most of which will be driven by Penfolds.
That will be down from the $391 million in earnings before interest and tax printed in the previous 2024/25 first half.
Earnings for the second half of 2025/26 are projected to be higher than the first.
RBC Capital Markets analyst Michael Toner said the guidance was a "significant miss" and about 30 per cent below the market consensus.
Treasury Wine shares dropped to an intraday low of $4.57 - the worst price in almost 11 years - after coming out of a trading halt called on Monday ahead of the investor update.
On Wednesday afternoon, the stock had recovered a little to be down almost nine per cent to $5.01.
The company also flagged plans to cut costs by up to $100 million a year, although the benefits might not start flowing through until fiscal 2027.
"With these changes, and supported by strong business foundations, (Treasury Wine) is confident that it will be well-positioned to deliver sustainable, profitable growth," Mr Fischer said.
Two years earlier, Treasury Wine paid $1.6 billion to buy luxury Californian winemaker DAOU Vineyards, whose product tiers ranged from $US20 to $US500 a bottle.
The value of its overall US business was recently written down by $687 million.
A drop in wine consumption in Australia, China and the US has previously been linked to cost-of-living issues and consumer health preferences.
However, Treasury Wine said "premiumisation" is still in play as consumers "drink less but better".
Treasury Wine also confirmed the cancellation of the remainder of a $200 million share buyback after raising an initial $30.5 million earlier in 2025.
