Highlights

  • Treasury Wine Estates shares remain down more than 41% over the past year.
  • The company expects FY26 EBITS of AUD 480–490 million.
  • The Ascent transformation targets annual cost improvements of AUD 100 million.
  • Customer inventory rebalancing remains a key focus across China and the US.
  • Margin expansion and lower leverage are central to the long-term strategy.

Treasury Wine Estates Ltd (ASX:TWE) has spent much of the past year rebuilding investor confidence after navigating one of the most challenging periods in its recent history. During the afternoon session on 15 July 2026, the shares traded at AUD 4.69 after touching an intraday high of AUD 4.74. While the stock remains down 41.08% over the past year, it has significantly underperformed the S&P/ASX 200 Index (ASX:XJO), which has gained around 2.40% over the same period.

That gap reflects more than short-term market sentiment. Investors have spent the past year weighing weaker earnings, softer demand across key markets and elevated customer inventories against the company's longer-term transformation strategy. As Treasury Wine Estates works through these challenges, attention is increasingly shifting from what happened over the past year to whether its multi-year turnaround can restore sustainable growth.

A difficult year reshaped expectations

Treasury Wine Estates has faced several headwinds over the past year, particularly across its China and Americas businesses.

Higher customer inventory levels have reduced shipment momentum, while changing consumer demand and a more cautious operating environment have weighed on earnings expectations. Rather than pursuing short-term volume growth, management has focused on restoring healthier inventory levels throughout its distribution network.

This approach may temporarily limit sales growth, but it is intended to improve the quality of future earnings by aligning shipments more closely with underlying consumer demand.

That shift has also changed how investors are evaluating the company. Instead of focusing solely on near-term financial performance, the market is increasingly assessing whether Treasury Wine Estates can successfully execute a broader business transformation.

Ascent is designed to reshape the business

At the centre of Treasury Wine Estates' strategy is Ascent, a multi-year transformation program aimed at simplifying the business and improving long-term profitability.

Rather than relying on a single growth initiative, the program combines portfolio optimisation, supply chain improvements, cost efficiencies and a stronger focus on premium brands.

Management expects the transformation to deliver approximately AUD 100 million in annual cost improvements, while strengthening the company's brand mix and supporting higher earnings margins over time.

The company is also targeting a long-term EBITS margin above 25%, compared with an estimated margin of around 19% in FY26.

Although the transformation is expected to involve one-off costs of approximately AUD 220 million to AUD 260 million, management expects the overall program to become cash positive after planned divestments.

Inventory remains a near-term priority

One of the biggest priorities for Treasury Wine Estates is completing customer inventory rebalancing across its largest markets.

In China, Penfolds customer inventory is expected to reduce by approximately 150,000 cases during FY26, with the remaining rebalancing scheduled for completion in FY27.

The Americas business is following a similar approach. Inventory cover remained broadly stable throughout FY26, with shipments expected to closely match customer depletion rates. Further inventory normalisation is planned during FY27 before the process is completed in FY28.

While these measures may constrain near-term shipment growth, they are intended to create a healthier demand profile and reduce the risk of excess inventory weighing on future earnings.

For investors, successful execution of this process is likely to remain one of the most closely watched indicators over the next two years.

Financial recovery is expected to take time

Treasury Wine Estates is not forecasting an immediate earnings rebound.

Management expects FY26 EBITS to be between AUD 480 million and AUD 490 million, while indicating that FY27 EBITS should be at least comparable with FY26 as inventory rebalancing continues across key markets.

This suggests that the company is prioritising operational stability over aggressive short-term growth.

A more meaningful improvement is expected further out, with management anticipating revenue growth from FY28 as customer inventories normalise, portfolio mix improves and transformation benefits become more visible.

At the same time, the company expects higher average revenue per case as premium products represent a larger share of sales.

Balance sheet discipline remains another focus

Alongside operational improvements, Treasury Wine Estates is also working to strengthen its capital structure.

Leverage is expected to peak at around 2.9 times during FY26 before gradually declining to below 2.0 times by the end of FY28.

Management expects this reduction to be supported by stronger free cash flow generation, proceeds from portfolio divestments and earnings improvements as the transformation progresses.

Lower leverage could provide greater financial flexibility while improving the company's capacity to invest in future growth opportunities.

Although the recovery is expected to take several years, balance sheet discipline remains an important component of the broader turnaround strategy.

What’s Next?

Treasury Wine Estates is attempting something more significant than a short-term earnings recovery. Through the Ascent transformation program, the company is repositioning its portfolio, simplifying operations and rebuilding profitability over several years rather than quarters.

The success of that strategy will likely depend on completing inventory rebalancing across China and the United States, delivering planned cost savings and gradually expanding earnings margins. While near-term financial performance may remain influenced by these transition efforts, investors are increasingly focused on whether the company can translate operational improvements into stronger and more sustainable growth over the longer term.