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Tag: downsize

  • Treasury Wine Estates Swallows $558m Blow in US Market Downsize: Total Write-Downs Top $1.2 Billion

    Treasury Wine Estates Swallows $558m Blow in US Market Downsize: Total Write-Downs Top $1.2 Billion

    Treasury Wine Estates (TWE), the company behind the Penfolds brand, has experienced an additional financial setback of $558.4 million following the scaling back of its operations in the United States. This recent loss brings the total write-downs to over $1.2 billion.

    Operational Changes and Focus on Underperforming Markets

    In June, the company announced to its investors that it intends to significantly downsize its brand portfolio and withdraw from underperforming assets, with a particular focus on its underperforming US market. TWE’s CEO, Sam Fischer, stated that the company is taking decisive steps to align supply with a stringent model of future demand, in light of an evolving US wine market.

    This strategic shift will lead to a reduction in the company’s yearly grape intake, with $137 million of the write-down projected to come from asset divestments. Despite these financial setbacks, the news was accompanied by an anticipated, above-estimate full-year earnings figure of $492 million.

    Future Prospects and Business Performance

    Fischer added that both the company’s ascent transformation program, and the strategic review of potential options for the future of its US business, are making good progress. He emphasized the continued positive momentum in the business, with key brands such as Penfolds, Daou, and Frank Family Vineyards outperforming their respective categories. Fischer also expressed confidence that the full-year earnings would surpass the guidance shared earlier in June.

    In TWE’s half-year financial report, the company disclosed a close to $650 million loss, with a dip in sales reported across all markets. Despite this, the company maintains optimism that it will rebound and achieve growth by the 2028 fiscal year.

    Questions & Answers

    What is the total amount of Treasury Wine Estates’ recent financial setback?
    The company has taken an additional $558.4 million hit, bringing total write-downs to over $1.2 billion.

    What strategic changes is Treasury Wine Estates making in response to its underperformance?
    The company plans to significantly reduce its brand portfolio and withdraw from underperforming assets. It will also align supply with a stringent model of future demand, focusing on the evolving US wine market.

    How does Treasury Wine Estates perceive its future prospects?
    Despite current financial setbacks, the company expressed optimism about its future. It expects key brands like Penfolds, Daou, and Frank Family Vineyards to continue outperforming, and aims to achieve growth by the 2028 fiscal year.

  • McDonald’s trims plans to sell parts of Asian operations

    McDonald’s trims plans to sell parts of Asian operations

    McDonald’s has downsized plans to sell parts of its Asia franchise after failing to find a suitable buyer in South Korea. The world’s largest fast-food retailer has a stringent list of terms for the deal, including keeping management and existing suppliers in place for a period of time in the hope of protecting the brand.

    Potential buyers balked at those demands, and prompted the decision to cut the country out of the current deal, said two people close to the matter.

    McDonald’s also plans to take a minority stake in the sale of the franchise in China and Hong Kong of up to 25 per cent, in an attempt to exercise greater control over the business that has in the past suffered from food safety scandals.

    The changes to the deal, which is near closing, with China’s Citic Group Corp and US private equity house Carlyle as the buyers, would reduce the size of the transaction to between $1bn and $2bn from what was originally expected to be as much as $3bn.

    The deal could close by the end of the month, said one of the people close to the deal.

    The sale of the 20-year franchise of 2,400 stores in China and Hong Kong has forced McDonald’s to strike a balance between reducing its exposure to China while also protecting its brand in the region.

    The deal attracted several Chinese bidders but people close to the process said the company turned many of them away because they were not deemed suitable to run the operation. The list of bidders included Sanpower Group, the owner of UK retailer House of Fraser, as well as Cinda Asset Management, a state-run bad-debt investor.

    The terms of the deal were unappealing to some of the private equity funds that originally were interested because McDonald’s has insisted the franchise not be publicly listed. Some private equity investors hoping to squeeze value out of the franchise considered terms such as maintaining management and suppliers for two years oppressive.

    US private equity house TPG, which partnered with Chinese retailer Wumart Stores, dropped out of the process at an early stage, followed later by Bain Capital and Shanghai-based partner GreenTree Hospitality.

    Yum Brands, which is nearly double McDonald’s presence in China, struggled with similar problems earlier this year.

    Yum Brands spun off its China business in a New York Stock Exchange listing in October with China-based private equity fund Primavera Capital and Ant Financial Services, an affiliate of Alibaba, taking a $460m stake in the operation.

    One investor has raised concerns about McDonald’s Latin American partner’s performance and whether McDonald’s would face similar issues in Asia by stepping back from operations on the ground.

    CtW Investment Group, which has a 0.2 per cent stake in McDonald’s and is affiliated to a federation of unions representing more than $250bn in assets, wrote to McDonald’s earlier this year citing worries over corporate governance at the fast-food chain’s master franchiser in Latin America, Arcos Dorados, which it says is hampering the chain’s performance in the market.

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  • Ralph Lauren closing stores as sales see slump

    Ralph Lauren closing stores as sales see slump

    Ralph Lauren is closing stores, cutting jobs and focusing more on its most popular brands to try to reverse its declining fortunes.

    Shares of the fashion company tumbled 4 percent Tuesday.

    The changes are the first big moves from CEO Stefan Larsson, who replaced company founder Ralph Lauren in the role late last year. Lauren is still executive chairman and chief creative officer of the fashion and home decor business he created.

    The New York company, known for its polo shirts and pony logo, plans to close more than 50 stores, or about 10 percent of its total retail stores. It will let go approximately 1,000 of its 15,000 full-time employees, or almost 7 percent.

    It will focus more on its three best-selling brands — Ralph Lauren, Polo and Lauren — and devote fewer resources to its smaller ones, such as Chaps and RLX. The company also hopes to produce its clothing faster, cutting six months from the production process to make it nine months.

    Ralph Lauren expects the restructuring to save it between $180 million and $220 million a year. That’s on top of $125 million in cost cuts from last year. It expects to incur restructuring charges of up to $400 million for the year and inventory-related charges of up to $150 million.

    For the current quarter, it expects revenue to fall in the mid-single digits and fall in the low double digits for the year.

    Shares of Ralph Lauren Corp. fell $4.12, or 4.3 percent, to $92.21 in morning trading Tuesday. Its shares are down about 30 percent in the last year.

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