While sales at its bottle shops fell in FY23, Endeavour Group is celebrating record pub profits, with sales up 31% to $1.98billion.
Bottle shop earnings fell 1.8% to $9.9billion, but group sales grew 2.5% for the year to $11.9 billion, with Group EBIT increasing by 10.7% to $1,023 million.
Endeavour Group Managing Director and CEO Steve Donohue said: “Our hotels offer welcoming and affordable social moments, from a drink and meal with friends, to live music and quality accommodation.
“Providing this comprehensive range of experiences has delivered strong results in the first period of unrestricted trading since 2019. Sales grew 31.0% to $2 billion in F23, and EBIT of $428 million was up 35.9%. F23 saw the welcome return of live music and events resulting in nearly 172,000 tickets sold. Sales growth in our hotels segment over the last four years has delivered a CAGR of 4.8%.”
Regarding Endeavour’s retail store results, Donohue said: “The H1 result reflected the cycling of the elevated pandemic performance, registering a 3.7% sales decline. H2 saw a return to growth with a 0.7% increase in sales. Over the last four years, our retail business has achieved a compounded annual growth rate (CAGR) of 4%.”
How consumer behaviour is changing
Donohue told investors during the company’s FY23 results briefing that he was not seeing any trading down by consumers in the wine segment in Dan Murphy’s and BWS stores.
He said there had been strong growth in the sales of luxury and premium wines in Endeavour’s Paragon Wine Estates portfolio, including Shingleback Wine in South Australia’s McLaren Vale and Cape Mentelle Winery in the Margaret River.
“In terms of trade down, I’ve said before, we’re not seeing it. We continue to not see it in any material way,” he said.
“I think the ‘watch outs’ are the ultra-premium champagne and the reopening of international travel with such gusto, as we’ve seen recently in the last half, means that there’ll be a fair bit of leakage back to travel retail with duty-free spirits up like 60%.”
Donohue also said the RTD space boming and noted that Hard Solo had recently sold out in some Dan Murphy’s stores.
“If you look at what’s going on in the premix RTD space at the moment, it is going faster and bigger than it ever has before, particularly in relation to lemon-flavoured beverages,” he said.
Outlook for FY24 & the World Cup effect
Donohue said he was happy with the positive momentum the company had seen in retail and pub profits the first six weeks of FY24, with customer demand remaining stable.
“I was chatting to (the executive) who leads our operations across hotels nationally the other day and he has been there for a long time, and he said to me hotels haven’t felt this good since Cathy Freeman in the 2000 Olympics,” he said.
“People are absolutely back into pubs, and they are there on times of day and days of the week they wouldn’t ordinarily be there.
“Our hotels offer welcoming and affordable social moments, from a drink and meal with friends, to live music and quality accommodation. Providing this comprehensive range of experiences has delivered strong results in the first period of unrestricted trading since 2019.”
Donohue said sales growth had continued in the first six weeks of F24 trading in retail stores, with an uplift of 2.5%.
“Looking forward, we expect customer demand to remain resilient. Our offering of affordable and accessible
experiences, leading value and convenience and the widest range of products continues to resonate, putting our
brands at the heart of Australia’s social moments. Importantly, our team of more than 30,000 people continues to
serve their customers and communities with exceptional commitment, bringing to life our purpose of creating a more
sociable future together.”
As for the continuing impact of cost-of-living pressures on retail stores and pub profits, Donohue said he wasn’t concerned.
“The amount of money that people are spending on an individual shop remains the same,” he said. “Of course, they’re getting slightly less because things cost a little bit more.
“But things just continue to be resilient. We’ll wait and see what happens through the course of the year ahead, but people continue to enjoy the simple pleasure of a beautiful drink.”