Dan Murphy’s and BWS are facing slowing sales

Aussies are increasingly turning to sparkling wine and cheaper alcohol sold in large value packs and the cost of living pressures is affect Dan Murphy’s and BWS’ bottom line.

Endeavour Group CEO Steve Donohue.

Shares in Endeavour Group, the nation’s largest owner of bottle shops and pubs, sunk to a fresh all-time low on Monday when it warned of slowing sales and issued a profit warning for the first half of 2025 as consumers pull back their spending on beer, wine and spirits.

The slowdown looks to have started in September.

The share price slide comes as the Endeavour boss Steve Donohue announced in September his intention to step down from the group and last year the pubs operator fought a bruising civil war with its largest shareholder, the pub industry’s Mathieson family, over the direction of the company and its recent financial performance.

Now a tough economy and frugal shopper is pinching sales for its bottle shops.

Stretched drinkers struggling from cost-of-living pressures are buying less alcoholic beverages or switching to more ‘value orientated’ products, such as sparkling wine instead of champagne or larger slabs instead of a few bottles of booze, as the tougher economy forces them to rein in spending.

There is stronger growth in larger packs of beer and boxes of pre-mixed spirits as shoppers strive to get value for money.

Endeavour Group, which owns bottles hops Dan Murphy’s, BWS and a portfolio of hotels, has highlighted the tougher trading conditions and slowdown in its liquor store sales as part of a first quarter trading update ahead of its annual general meeting on Wednesday that has shown slowing sales at its flagship retail outlets.

On Monday, Endeavour issued a trading update that revealed sales for the first quarter were $2.538bn, the same as the first quarter for 2024. This zero growth in sales was against sales growth of 0.6 per cent for the first seven weeks of the quarter as reported at the company’s full year results. Although its hotels arm of more than 350 venues performer better with sales accelerating through the quarter.

The retailer warned that its fall in sales was also accompanied by a greater proportion of its sales now on promotion or discount, as shoppers sought out value in the aisles of Dan Murphy’s or BWS, generating a margin mix across the board for the chains.

When drinkers are picking up beverages at their local Dan Murphy’s or BWS they are also increasingly choosing products on higher promotion and thinner margins. As a result, Endeavour now expects that its operating earnings margin in the first half for its retail arm will be between 7 per cent and 7.5 per cent compared to 8 per cent in the first half of 2024.

Shares in Endeavour sank upon the news, closing down 23c, or almost 5 per cent, at $4.50. It is the lowest the shares have traded at since it demerged from Woolworths in June 2021. The stock is down 26 per cent over the last five years.

Its retail arm – which owns 240 Dan Murphy’s and around 1400 BWS stores – earns the majority of the company’s sales and earnings with a marked slowdown in its performance likely to worry investors and analysts.

“After a positive start to the year, retail sales momentum slowed in September. During the quarter, promotional intensity lifted across the sector as customers became increasingly value conscious,” said outgoing Endeavour chief executive Steve Donohue.

“In challenging market conditions, our retail business has continued to execute well – growing our market share, maintaining our best-in-class Voice of Customer scores and expanding the My Dan’s loyalty base to 5.5 million active members.

“In the near term, softer sales and a lower margin sales mix, resulting from both a higher percentage of sales on promotion and consumer downtrading, are expected to impact Retail profitability,” he warned.

Shoppers are changing their drinking habits as value becomes increasingly important. A sign of the continued value consciousness of customers is that sparkling wine is gaining more share and continues to grow. While Dan Murphy’s and BWS are witnessing customers shifting into value categories and formats, seeking better price per litre value. In beer for example this means seeing movement from 24 packs into 30 packs while in premix spirits there is a shift from 6 to 10 packs. And in spirits this is showing itself in a shift from 700ml to 1L formats.

However, sales at its portfolio of around 350 pubs and hotels across the country have accelerated through the first quarter with sales momentum improving in September, driven by higher food and beverage sales over Father’s Day, school holidays and the footy finals. Sales for its more than 12,500 gaming machines also proved resilient for the period, the company said.

First quarter sales at its hotels arm rose 2.5 per cent to $567m, up from the 2 per cent growth in hotel sales for the first seven weeks of fiscal 2025. Total group sales rose 0.5 per cent to $3.11bn.