Shock attack on TWE by US hedge fund manager
Treasury Wine Estates has defended its business performance after being slammed by a hedge fund manager at New York investor conference.
Angela Aldrich from Bayberry Capital Partners claimed at the Sohn Investment Conference that TWE shares were overvalued by more than 50% and accused the company of "channel stuffing" to inflate its sales figures.
However, TWE has issued a statement saying: “TWE recently reiterated guidance to the market for reported EBITS growth of approximately 25% for F19, and in the range of approximately 15% to 20% for F20. We are pleased with how the business is performing across all regions and across our portfolio.”
TWE also confirmed that its shipments were broadly in line with depletions, and that it took a disciplined approach to managing its inventory.
TWE announced in February that its net sales revenue is up 16% to $1,507.7million, representing the largest organic growth rate in the company's history. Overall, the Asian region was the standout performer, with EBITS growth up 31% to $153.1 million.
"The fundamentals of the Asian wine market as a whole remain enormously attractive, and we are not seeing a slowdown in demand for our brands," CEO Michael Clarke said.
"We also see tremendous opportunity to expand our penetration into more cities and across more partners in China. We have an ambition to expand our presence and availability by more than 50% in the next three years."
Aside from “channel stuffing” - the practice of pushing a larger amount of stock through a retailer than can actually be sold, Aldrich also said TWE’s business in China was being threatened and undercut by fakes and counterfeits and that 19 Crimes was facing slowing growth in the US.
One slide in her presentation dismissed the idea that 19 Crimes was still performing strongly in the US.
“Wrong,” Aldrich said, adding a quote from a “former TWE employee” that: “19 Crimes is almost at saturation in terms of distribution. 19 Crimes makes me sad. It’s a little bit of a house of cards. It’s too late to reverse pricing pressure, they have milked it for too long.”
She noted that 19 Crimes is available through discount distribution channels such as Costco and 7/11 in the US, but has lowered its price to do so. A bottle on 7/11's website is listed at less than $10 despite debuting in the US at over $18 a bottle.
Morgans analyst Belinda Moore told The Sydney Morning Herald she disagrees with Aldrich’s assessment.
"We think it’s a fantastic business. It’s got iconic brands and wine assets around the world," she said
"It's a great global growth story, it's an extremely well-managed company and we think it's got a long-dated growth profile. And it's got the luxury wine on its balance sheet to underpin that kind of solid growth over coming years.
"We rate this company, its assets, its brand, its strategy, its management team very highly.”