Endeavour Group has given a trading update for the first quarter of FY22, which shows a 0.2% drop in revenue to $2.654billion as sales plateau after the surge in off-premise activity during initial lockdowns last year.
Overall, sales in the 14 weeks ending October 3 across the business were down 1.2% to $2.94 billion.
The company said retail sales were in line with the very strong Q1 sales in FY21. Sales have grown 21.4% when compared to Q1 F20 (pre COVID-19). For non-lockdown states and territories sales increased 17% over this two-year period.
Managing Director and CEO Steve Donohue said seltzer, rosé and premium products were its most dynamic categories.
Total online sales were $305 million for the first quarter, an increase of 34.4% on the prior corresponding period and online penetration was 11.5%, which is a new high. Endeavour said portion of this growth was attributable to the shift to at-home consumption following on-premise closures. Online penetration also grew outside of NSW and Victoria. Consumers were also treating themselves to super-premium wines and spirits when shopping online.
Donohue told Endeavour’s first Supplier Forum as a stand-alone business earlier this month that liquor retail has “changed irrevocably”.
“We are expecting the biggest digital Christmas on record,” he said.
However, Donohue said management of team availability has been challenging, both when closing and reopening, with team shortages an industry-wide issue. Additionally, supply chain constraints affecting both global and local networks are limiting access to some products, particularly imported drinks.
“I am particularly proud of the way our teams have come together to support one another during this time. Our customer experience across both BWS and Dan Murphy’s improved again this quarter, with the team delivering excellent service while navigating new trading requirements and larger than normal volumes,” he said.
Imported drink shortages
Endeavour warned that major disruptions to global supply chains are limiting its access to some products, particularly imported drinks such as liqueurs and spirits.
“There are also some stock constraints on imported liqueurs and certain spirits across the world, with many customers getting into making cocktails at home with bars and venues closed during lockdown,” Donohue said.
“Inevitably there will be some relative minor impacts on sales due to availability, there is just no two ways about it because as much as I would like to think everybody will switch into an alternative product, that is not entirely true.”
Endeavour hotels battle trading restrictions
Donohue added that COVID-19 continued to impact its trading environment during Q1 of FY22.
“While retail trading momentum was sustained across the start of the financial year, our Hotels business was significantly disrupted by the lockdowns in the key states of Victoria and NSW,” he said. “Nationally, approximately 40% of our hotels were closed across the quarter and various trading restrictions were in place across the country.
Total sales in the first quarter declining by 9.9% to $282 million. Snap lockdowns and COVID-19 related restrictions also
limited trading in other states and territories.
The company noted its Victorian hotels were either closed or significantly restricted throughout this period. Whereas, NSW was in a period of “COVID-normal” in Q1 last year, with hotels open, but operating with restricted trading conditions.
Endeavour said it was continuing to look beyond these immediate challenges, and was investing in building and improving its hotels business.
In the quarter, it acquired the Terrey Hills Tavern in NSW (above) and The Manly Hotel, Queensland, it undertook a renewal of the Sunnybank Hotel. At the end of the quarter its portfolio consisted of 336 hotels and five managed clubs.
“Notwithstanding the closures in our hotels business, we rolled out new technology like digital order and pay and a new time and attendance system,” Donohue said. “In the quarter we also extended support to team members across our businesses, providing opportunities for hotel teams to work in the retail business, paid vaccination leave and support for team members who were required to isolate due to potential COVID-19 exposure.
“As our hotels across NSW and Victoria reopen their doors and welcome back customers, we will continue to focus on offering customers a sociable and safe hotel experience. While we are eagerly anticipating reopening in Victoria, we remain mindful of the broad, ongoing impacts of COVID-19.”
Endeavour said it was encouraged by the current vaccination rates, which should allow it to get back to more normal operations in time for the important festive and summer period.
Donohue also noted that cocktails were becoming increasingly popular with patrons at ALH venues, following the booming interest in at-home mixology during COVID-19. He said the introduction of order and pay at tables also meant more people are ordering higher-priced cocktails.
This was reflected in new data released by me&u this week that revealed the top 5 drinks during NSW reopening week. Cocktails were the three biggest sellers, with the Espresso Martini, Aperol Spritz and Margarita the most popular choices for table service.