Treasury Wine waters down FY25 guidance around $10M; stock at 10-year low

Treasury Wine Estates (ASX:TWE) sunk just over -1% in morning trades on Tuesday as the company flagged a revenue downgrade for FY25, but halfway through lunch, shares had pared losses back to -0.7% for $8.045/sh.

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The stock was briefly in the green – +0.11% – according to live pricing around midday. But that optimism hasn’t held.

Despite Chinese trade relationships fairing better in recent history than they did after Scott Morrison claimed COVID-19 was designed in a Wuhanese lab, there’s still one big comeback narrative to be unlocked for TWE.

Today’s (relatively slight) FY24 EBIT downgrade from $780 million to $770 million hasn’t necessarily helped. But it looks like pain was already priced in.

Just consider TWE’s 1Y returns are down -30%. Or, for an even quicker understanding, just look at the company’s 1Y stock price chart.

So what was driving TWE’s downgrade announcement on Tuesday? Basically, less demand in the U.S. – especially, it seems, from bargain-hunter consumers.

“TWE now expects F25 EBITS to be approximately $770m, with the variance to the previously provided outlook of ‘approximately $780m’ driven by lower than expected Premium portfolio shipments in the US,” TWE wrote on Tuesday.

“Economic uncertainty and weaker consumer demand has recently impacted wine category performance at price points below US$15.”

Also of concern to the company is that its U.S. operations in California are set to be hit as distributor Republic National Distributing Company (RNDC) is winding up its Cali operations.

The company’s shareholders might want to start paying attention to RNDC’s books: “TWE’s relationship with RNDC spans 25 U.S. states, including California,” the company wrote.

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“The closure of RNDC’s California operations is not expected to impact the remainder of its business.” Surely, TWE shareholders will be hoping so.

But lingering behind all of this is, perhaps, a more worrying factoid – though not one that hasn’t already been more or less the case since April.

If you look at TWE’s 20Y chart, the stock is currently at a decade low.

TWE last traded at $8.04/sh.

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