Endeavour Group profit tumbles as rates keep lid on sales growth

Newly-installed Endeavour boss Jayne Hrdlicka says its move to make booze cheaper at Dan Murphy’s has helped it claw back market share from major rival Coles Liquor as well as independent stores.

Heading into her third month in the role, the former Virgin Australia chief executive is in the midst of a strategy refresh in hopes of returning profit and sales growth for Endeavour, which also owns BWS and and hundreds of pubs nationally under the ALH Hotels banner.

Endeavour on Wednesday reported a 17 per cent drop in net profit to $247 million in the half-year ended January 4, which included a $40m one-off cost related to the planned closure of a liquor distribution centre in Melbourne.

It delivered slim sales growth of just under one per cent to $6.7 billion, hurt by the performance of its network of 1742 Dan Murphy’s and BWS stores, where sales rose just 0.2 per cent to $5.5b.

Its hotels business performed better with sales up 4.4 per cent to $1.2b. The result was helped by new menus, refurbishments and occasions like Father’s Day and Christmas, Endeavour said.

RBC Capital Markets analyst Michael Toner said the results were broadly in line with guidance provided in early January.

Ms Hrdlicka said its investment in lower shelf prices at Dan Murphy’s had been embraced by customers amid an intense price war with Coles’ Liquor division, where sales declined by 3.2 per cent in the half.

Speaking to The Nightly, she said the competitive intensity in the second quarter was the highest level it had seen as a business.

“We had an opportunity to do more for our customers and to reset shelf prices in Dan Murphy’s and to get more competitive promotionally,” Ms Hrdlicka told The Nightly.

“That’s not us leading that, that is us looking at what was going on around and saying, ‘We’re not keeping pace with the promotional activity in the marketplace and that’s costing us’.

“We can definitely see market share trends moving in our direction and we’ve had six consecutive months of retail sales growth and that’s in a declining market.”

In a trading update for the first seven weeks of the second half, sales grew 1.3 per cent for retail and 4.5 per cent for hotels. But Ms Hrdlicka acknowledged momentum in both businesses had slowed in February compared with January.

Endeavour shares closed 3.5 per cent lower to $3.84 on Wednesday.

Ms Hrdlicka echoed recent comments from other retailers that it was yet to see the impacts of the February interest rate rise on shopping behaviour at the tills.

“We’re very conscious of the fact that we play in the experience economy and the experience economy is very robust,” Ms Hrdlicka said.

“You look at major sporting events, you look at major entertainment events . . . I’m sure our pubs along the pathway to and from were heaving.”

During the half, Endeavour said customers returned to their trusted beer brands like Great Northern, Carlton Draught, Coopers, Hahn, XXXX, Corona, VB, Asahi, Tooheys and Balter. Popular liqueur Bailey’s was a standout performer at Christmas.