Shareholders in Treasury Wine Estates Ltd (ASX: TWE) would be smarting at the moment, with the shares down more than 50% over the past 12 months.
The question is: can new-ish chief executive officer Sam Fischer turn the ship around, or are the headwinds the company faces just too strong?
The analyst team at UBS is not convinced and has slapped a sell recommendation on the stock. More on that later.
For his part, Mr Fischer has not wasted any time in getting the message out to the market that he's there to make changes, announcing in mid-December that the company would look to strip $100 million per annum in costs out of the business as part of its so-called "TWE Ascent" transformation program.
The company also cancelled its $200 million buyback at the time, in a bid to increase flexibility and lower debt levels.
Mr Fischer had this to say on the outlook at the time:
We are currently experiencing category weakness in the US and China, two of our key growth markets, which will impact our business performance in the near-term. Maintaining the strength of our brands and the health of their respective sales channels is of critical importance to our Management team and our Board as we navigate through the current environment. TWE is a high-quality business with strong foundations in place for sustainable, profitable growth. Our powerful portfolio of brands, leading market positions in attractive growth markets, unparalleled supply chain and highly engaged, capable team are all considerable strengths that position us strongly to deliver sustainable, profitable growth over the long-term.
Treasury does have some elements in its favour, not least the powerhouse wine label Penfolds.
Image source: Getty Images
Buyer in the wings?
The company also welcomed French billionaire Olivier Goudet to the share register as a significant shareholder in December, prompting questions about whether he could make a bid for the company.
Mr Goudet is well known in European business circles as the former head of JAB Holding, which managed the wealth of Germany's Reimann family.
While in that role, Mr Goudet spearheaded the takeover of companies including Krispy Kreme and Pret a Manger, and according to a report in The Australian, he also personally bought a chateau in Bordeaux with his wife in 2021.
Mr Goudet, who was also the former Chief Financial Officer at Mars, stepped down from JAB Holding in 2023.
Shares not looking cheap
Despite these tailwinds, the UBS team is not convinced and has downgraded its price target on Treasury shares from $5.25 to $4.75, with a sell recommendation.
Treasury shares are currently changing hands for $5.01.
UBS said that, in terms of headwinds, there was a significant change in consumer behaviour, with young people drinking less than their older counterparts, an effect keenly felt in the key US and China markets.
Within alcohol, wine has underperformed other drinks, such as spirits and ready-to-drink brands, UBS said.
UBS added that the once large China market is potentially oversupplied with Penfolds.
Treasury was valued at $4.45 billion at the close of trade on Thursday.
