Treasury Wine Estates share price lower after coronavirus update

The Treasury Wine Estates Ltd (ASX:TWE) share price is tumbling lower after it downgraded its guidance for FY 2020 again due to the coronavirus outbreak…

| More on:
a woman

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

The Treasury Wine Estates Ltd (ASX: TWE) share price is tumbling lower on Tuesday after the release of an update on its FY 2020 guidance.

At the time of writing the wine company's shares are down 4% to $11.17.

What did Treasury Wine Estates announce?

This afternoon Treasury Wine Estates provided an update on its earnings expectations for FY 2020 as a result of the ongoing operational impacts from the coronavirus outbreak.

Although the full operating and financial impacts of the outbreak are yet to be fully determined, the company now has sufficient information to conclude that consumption across discretionary categories in China has been significantly impacted in February.

Furthermore, it has reason to believe that this impact on consumption will be sustained through at least March.

As a result, management no longer believes that it will achieve its previously downgraded FY 2020 guidance for reported EBITS growth of between 5% and 10%.

What else did the company announce?

The company also provided information to assist investors with their understanding of the potential impacts from the outbreak on its operating and financial performance in FY 2020.

It advised that infection containment controls mean its staff in China have not yet returned to the office and continue to work from home. The same situation is being experienced by the company's partnership network. This includes wholesalers, retailers, and logistics providers.

Management notes that its depletions performance leading into the Chinese New Year continued to be strong and in line with its plans. This reflects strong marketing and pull-through programs across its brand portfolio prior to impacts from the outbreak.

However, post Chinese New Year consumption across discretionary categories has been significantly adversely impacted. The company intends to remain vigilant in ensuring its shipments into the market are appropriately calibrated to the rate of depletions once consumption normalises.

The company also has concerns that the coronavirus outbreak could impact its performance in markets outside of China. However, at this stage this is not expected to have a material impact on its FY 2020 performance.

Finally, management notes that Asia is a predominantly Luxury wine sales region. This means it has the flexibility to allocate Luxury wines to later fiscal periods or other geographies in order to deliver sustainable earnings growth. Should the impacts of coronavirus be resolved in FY 2020, it does not expect its FY 2021 plans to be impacted.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Treasury Wine Estates Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Fallers

Person with thumbs down and a red sad face poster covering the face.
Share Fallers

Why Domino's, Lynas, Paladin Energy, and St Barbara shares are sinking today

These shares are having a tough session. What's going on?

Read more »

A male investor wearing a blue shirt looks off to the side with a miffed look on his face as the share price declines.
Share Fallers

Why Amcor, Boss Energy, Brickworks, and Mineral Resources shares are tumbling today

These shares are starting the week in the red. But why?

Read more »

Person with thumbs down and a red sad face poster covering the face.
Share Fallers

The worst 3 ASX 200 stocks to buy and hold in October unmasked

You would have done well to avoid these three ASX 200 stocks in October.

Read more »

A man sits in despair at his computer with his hands either side of his head, staring into the screen with a pained and anguished look on his face, in a home office setting.
Share Fallers

Why AFT, Amcor, Corporate Travel, and Macquarie shares are falling today

These shares are ending the week in the red. But why?

Read more »

A male investor wearing a blue shirt looks off to the side with a miffed look on his face as the share price declines.
Share Fallers

Why AGL, Imugene, Star, and Woolworths shares are dropping today

These shares are dropping on Thursday. Let's see why investors are selling them.

Read more »

A young man punches the air in delight as he reacts to great news on his mobile phone.
Share Fallers

Why Corporate Travel Management, JB Hi-Fi, Mineral Resources, and Syrah shares are rising

These shares are having a strong session. Why are investors buying their shares?

Read more »

A guys points his fingers down.
Share Fallers

Why Brainchip, Cettire, Star, and Woolworths shares are being sold off today

These shares are having a difficult time on hump day. But why?

Read more »

Three guys in shirts and ties give the thumbs down.
Share Fallers

Why Black Cat, BlueScope, Cettire, and Coronado shares are falling today

These shares are missing out on the good times on Tuesday. But why?

Read more »