Treasury Wine Estates sees 16% rise in first-half revenue, looks to French wines in China for growth
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Treasury Wine Estates sees 16% rise in first-half revenue, looks to French wines in China for growth

Treasury Wine Estates (TWE), the world’s largest listed winemaker, reported its best-ever organic net sales revenue growth last week, when it released earnings for the first half of the year. The company’s strong showing comes in contrast to many winemakers, and is proof positive that its high-end strategy is paying off. We’ve seen a similar situation elsewhere in the luxury sector this earnings season, where ‘premium’ luxury has appeared protected from some of the negative headwinds assaulting less-than premium stocks. Luxury bellwethers LVMH and Kering are perhaps the most prominent examples.

Treasury Wine Estate’s share price has risen by 9% so far this year

19 02 luxurygraph

Source: Yahoo Finance

Here’s how TWE’s first-half results played out: the company logged “the strongest net sales revenue growth in our history” according to CEO Michael Clarke, which came in at 16%. Profit also rose by double digits: group earnings before interest and taxes came in at 19% - adjusted, that becomes 17% - and earnings per share rose by 19%. All these figures are reported against the same period in the previous year.

Summing the results up, Clarke said: “Like in previous years, we've delivered on expectations while continuing to implement significant changes to the business and investing for future growth," chief executive Michael Clarke said. The results presented today demonstrate not only the strength of our premiumisation strategy and global balance, but in particular they highlight the strength of our competitively advantaged regional business models.”

On TWE’s earnings call, he particularly singled out China for comment, where he said Treasury would chase growth by focussing on French wines (which make up 30% to 40% of the country’s market). Discussing the company’s business model there, he said: “As many of you will know, in China, we use a wholesale model where we are the distributor. Unlike our competitors, we do not rely on a third-party distributor to sell our brands and, therefore, we do not incur the approximately 50% distributor margin. Our model has a number of significant benefits, driving value for us, our customers and the consumer.”

Disclosure

Dominion holds Treasury Wine Estates in its Global Trends Luxury Fund.


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