Dan Murphy’s, BWS owner Endeavour Group stocks up as it warns of $8m fuel costs hit

The owner of Dan Murphy’s and BWS liquor stores is stocking up on booze as it braces for a hit of up to $8 million on higher fuel costs related to the ongoing war in the Middle East.

Endeavour Group, which also owns hundreds of pubs and hotels across the country, said on Monday it was working to offset the impact of fuel costs which have soared since the US and Israel began a military offensive against Iran on February 28.

The conflict, which shows few signs of reaching a peace accord, has squeezed global oil supply, left countries scrambling to shore up reserves and is already driving up the cost of everyday goods and services as prices remain at elevated levels.

Endeavour said it was building a buffer against potential supply chain constraints by bringing in $400m of additional inventory of what it called “key fast-moving products”.

The group said it was experiencing pricing pressure throughout its supply chain due to the increased fuel costs and was working with its suppliers to manage the pressures to mitigate structural cost inflation and to minimise the impact on customers.

Even so, it warned investors it was likely to incur additional fuel and freight-related costs before the end of the financial year in June of between $6m and $8m, which will primarily be reflected in retail gross margin.

“The group is actively working to manage the impact of the conflict in the Middle East by taking steps to minimise the risk of supply disruption, mitigate elevated fuel and freight costs and undertake downside case scenario planning to ensure maximum commercial resilience and appropriate inflation management,” it said.

Endeavour said it was targeting $100m of cost savings for next financial year as it looks to cement a three-year turnaround strategy that has been hit by changing consumer behaviour and the continuing cost-of-living crisis.

Also releasing its third-quarter update on Monday, the company reported a small rise in group-wide sales to $2.93 billion in the 13 weeks to April 26, compared to the same period a year earlier.

The leap was led by a 3.7 per cent jump in its hotels division to $531m, despite a drop in momentum in March.

Chief executive Jayne Hrdlicka said it was building on a record trading result on Anzac Day with a value-focused winter menu and fuel card giveaways to keep punters coming through the doors.

“We remain confident in the defensive revenue characteristics of the hotels business, which has a track record of strong cash flow generation supported by through-the-cycle consumer demand,” Ms Hrdlicka said.

“Furthermore, our unique portfolio of Hotel and Retail businesses provides a natural hedge to any shifts in consumer spending between off-premise and on-premise.”

Retail sales enjoyed a marginal rise of 0.7 per cent to $2.4b thanks to increased activity over the Easter holiday, but Ms Hrdlicka noted consumer demand remained subdued outside of key events.