Treasury Wine down over 10% on writedown news

Treasury shares are sinking. Here's why.

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Shares of Treasury Wine Estates (ASX: TWE) have fallen some 12% today on news the company will take a $160 million in writedowns that will see its full year earnings significantly affected.

The writedowns will in part provide for the company addressing "excess, aged and deteriorating inventory. This includes action to destroy their old and aged commercial stock, ensuring that only the freshest and highest quality wines are available for brand conscious US consumers."

The writedown also includes discounts and rebates needed to incentivise U.S. wine sales. In a statement, CEO David Dearie said, "We have been operating at the higher end of our desired distributor inventory levels in the US and while TWE has been focussing on reducing days' inventory organically, advances in logistics and warehousing, combined with a renewed focus on efficiency has resulted in US distributors significantly reducing their targeted inventory levels."

In the same statement, the company confirmed that 2013 EBITS would be in line with analyst estimates of $216 million – that is, before the unusual items.

Treasury Wine Estates shares have lately been trading for a rich valuation indeed, at nearly 40 times earnings. Since demerging from Foster's Group in 2011, shares of Treasury Wine Estates have risen nearly 50%, versus a just 5% rise in the S&P/ASX 200 index (Index: ^AXJO) (ASX: XJO).

Even with today's fall, shares still appear fairly pricey. In other words, thirsty investors should look elsewhere before uncorking this wine.

In the market for promising ASX shares? Get "3 Stocks for the Great Dividend Boom" in our special FREE report. Click here now to find out the names, stock symbols, and full research for our three favourite income ideas, all completely free!

More reading

Motley Fool contributer Catherine Baab-Muguira does not own shares of any company mentioned here.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »