The rising cost of living crisis is no better illustrated than in Endeavour Group Ltd’s first quarter sales results.
Endeavour has its tentacles spread far and wide as the owner of Dan Murphy’s, BWS and the nation’s largest network of pubs.
Ahead of its Annual General Meeting tomorrow, (which is being marred by a bitter boardroom and investor fight) the company has said that consumers have turned to cheaper mainstream beer and are using the pokies in its pubs less frequently.
Endeavour reported a 2.1% lift in first-quarter sales to $3.09 billion.
The company noted consumers were looking for cheaper alcohol brands and were putting less money through its 12,500 poker machines. Notably, Coles Group Ltd and Woolworths Group Ltd have reported similar trends.
The numbers were solid for Endeavour, with retail sales data showing a 1.9% increase to 2.54 billion.
Hotel sales climbed 2.8% to 553 million.
Across its liquor stores, the company saw a 2.6% growth in sales for the quarter.
“In retail, customers are searching for value and discovery, which is reflected in shifting category trends, including higher demand for mainstream beer, rosé and pre-mixed drinks,” Endeavour chief executive Steve Donohue said.
There was less demand for alcohol for Father’s Day this year.
“After a strong start to the quarter, sales growth moderated somewhat in August, with a softening in demand for Father’s Day gifts. Momentum trended up again through the last two weeks in September, and this has continued into the second quarter.
“In both brands, shopping frequency and average item prices increased, which more than offset a reduction in items per basket. Average price inflation in the quarter moderated from a peak in Q4, to approximately 5% year-on-year, driven primarily by excise increases in the beer, spirits and pre-mixed drinks categories.”
Interestingly, Endeavour added 626 new products to its range in the quarter, half from smaller suppliers and 82 of which are part of the company’s Pinnacle Drinks (owned and exclusive) brand portfolio. Over half of the sales growth in BWS and Dan Murphy’s this quarter was achieved through new products.
“Dan Murphy’s remains the destination of choice for customers seeking the lowest prices, widest range and expert service. This is highlighted by the year-on-year uplift in its Voice of Customer score, which was up two points to 81 in the quarter. BWS continues to deliver both convenience and value to customers, maintaining a steady Voice of Customer score of 74 points,” Donohue said.
eCommerce sales saw an uptick across its brands.
“In the quarter, 8.7% of total Retail sales were generated through our eCommerce channels, representing sales of $221 million. Dan Murphy’s saw double digit online sales growth driven by the convenience of pick-up at store, which comprised a record 70% of Dan Murphy’s online orders placed in the quarter. By contrast, Jimmy Brings sales were in decline as we recalibrated our cost base and investment levels within this business, in response to channel consolidation in this space.”
Donohue expects further upside as the holiday season approaches.
“Hotels’ sales revenue grew 2.8% in the quarter, driven by Food and Bars sales as patrons gathered in our venues for major sporting events and Father’s Day in particular, more than offsetting softer Gaming revenue. The “Matildas Effect” saw 1.2 kegs of beer sold every minute in our Hotels during the semi-finals and final in August, and we welcomed a record 65,000-plus guests on Father’s Day. On a comparable basis Hotels’ sales increased 1.2%, cycling an additional public holiday long weekend in September last year.
“Christmas bookings in hotels are already breaking records. At the end of Q1, bookings are at 40% of capacity across 266 hotels nationwide that are hosting Christmas Day events. We anticipate that close to 46,000 Australians will enjoy festive celebrations at our hotels.
“Looking ahead, we have strong plans in place across the group to ensure we are the destination of choice for Australians again this festive season, as customers seek out our brands to help them enjoy memorable social occasions with family and friends.”
Below forecast ahead of angry AGM
During the second quarter Endeavour can also expect strong support from Black Friday and Cyber Monday, the Spring Racing carnival and general entertaining and gifting at Christmas.
“We remain focused on profitable growth and delivering long-term value for our shareholders while offering the very best prices, service and experiences for all customers. Our team of over 30,000 around the country look forward to welcoming customers in our retail stores, hotels and wineries and showcasing our unbeatable range and value.”
While sales have been solid, E&P Capital retail analyst Phillip Kimber said the sales results were below his forecasts, calling them “slightly disappointing”.
He said these results could spark further anger from the rebel Endeavour shareholders led by pokies baron major shareholder Bruce Mathieson at tomorrow’s AGM.
There is anger over recent poor financial performance and a sliding share price, which has led to a civil war within the group.
Mathieson, who holds 15%, is seeking to have former Woolworths executive Bill Wavish elected to the board, a move that has angered chairman Peter Hearl and the majority of the board.
Endeavour is down 2.29% today ahead of what is expected to be a brutal AGM.