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By Christine Chen and Shivangi Lahiri

SYDNEY (Reuters) -Australia's Treasury Wine Estates on Monday pulled its earnings guidance for 2026 and paused an A$200 million ($130 million) share buyback, citing weak sales of its flagship Penfolds wines in China and distribution challenges in the U.S.

The announcement sent shares of Treasury, one of the world's top five winemakers by volume, down 14% to A$5.99, their lowest point in more than 10 years.

Treasury said sales of Penfolds in China had been weaker than expected due to changing alcohol consumption habits, including fewer large-scale banqueting occasions.

China has been central to the Melbourne-based winemaker’s growth since Beijing lifted steep import tariffs that had kept the iconic label off shelves for more than three years.

"If the performance trends indicated by the preliminary data continue through F26, Penfolds depletions targets for F26 in China are unlikely to be achieved," the company said.

As a result, it said it was no longer appropriate to retain Penfolds guidance for low- to mid-double-digit earnings growth in 2026 and 15% earnings growth in fiscal 2027.

"The complete withdrawal of guidance for Penfolds in FY26 and FY27 speaks to the high level of uncertainty caused by evolving consumption dynamics in the Chinese market," RBC Capital Markets analyst Michael Toner said.

In the U.S., Treasury said its operations had been disrupted by the exit of its distributor in California, Republic National Distributing Company (RNDC).

The transition to new partner Breakthru Beverage Group would cost around A$50 million in sales, it said, with negotiations continuing over roughly A$100 million of inventory held by RNDC.

The setbacks led Treasury to withdraw its group-wide earnings forecast for the 2026 fiscal year and pause a planned A$200 million share buyback programme announced in August. It already repurchased about A$30 million of shares.

RBC’s Toner said the pause on the remainder of the buyback was "unexpected" but "prudent in our view in the context of near-term trading uncertainty".

The winemaker said several initiatives were being implemented to mitigate the impacts of a weaker Chinese market in the year to June 2026, including pursuing opportunities to re-allocate product to select customers in other key markets.

Treasury will hold its annual general meeting on Thursday.

($1 = 1.5333 Australian dollars)

(Reporting by Christine Chen in Sydney and Shivangi Lahiri in Bengaluru; Editing by David Gregorio, Diane Craft, Sherry Jacob-Phillips and Sonali Paul)

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