Endeavour Group posts $445m net profit for maiden results driven by bottleshop sales

Australians are drinking less alcohol, but when they do reach for a wine, beer or spirit they are increasingly grabbing a bottle from the more expensive shelf.

Endeavour chief executive Steve Donohue at a Dan Murphy’s cellar. Picture: David Geraghty.

Australians are drinking less alcohol, but when they do reach for a wine, beer or spirit they are increasingly grabbing a bottle from the more expensive shelf at Dan Murphy’s or BWS to consume at home as a treat to cope with lockdowns, Endeavour CEO Steve Donohue says.

It is not just alcoholic drinks flying off the shelves, with sales of non-alcoholic or low-alcohol ­liquor exploding, while premium spirits led by the huge demand for high-priced gin were helping to bolster profit margins.

And although the latest round of lockdowns are strangling sales for Endeavour’s portfolio of 339 pubs and hotels, sales at its bottle shops are booming and Mr Donohue is excited about the year ahead and in particular Christmas, with the retailer expecting people to be able to celebrate with fewer restrictions.

“Ask yourself where would you rather be? People will be busting to get back to the pub. We have seen it before as we’ve emerged from lockdowns and we are ready to serve those customers. The schooners will be cold and the schnitties will be hot,” Mr Donohue told The Australian as Endeavour posted its maiden results as an independently listed company, revealing group sales of $11.595bn, up 9.3 per cent, and a net profit of $445m.

It is the first glimpse inside the Endeavour business since it was demerged from Woolworths in June, with the company owning retail chains Dan Murphy’s, BWS, wine auction site Langton’s as well as several wine assets.

The company declared its first ever dividend, of 7c a share, payable on September 22.

Mr Donohue said customer engagement improved during the year across its retail arms, led by ­liquor chains Dan Murphy’s and BWS, while it invested $312m in capital expenditure to fuel its growth priorities.

He said the business had shown resilience through the difficult trading conditions brought on by the pandemic.

The company said retail sales for the year were up 9.6 per cent at $10.2bn, while EBIT increased 17.6 per cent to $669m. Customers switched to in-home consumption, sparked by Covid-19 restrictions and the closure of pubs that began in March last year.

This was helped by consumers opting for less alcohol but spending more when they did grab a bottle from one of Endeavour’s stores.

“There is a swing to premium. As customers endured Covid they sought to treat themselves and Dan Murphy’s is certainly a destination for that,” Mr Donohue said.

“The real story is overall Australians continue to moderate their consumption of alcohol and that has a double benefit for us. We are strong believers in responsible consumption of alcohol … but the benefit for us is as they are drinking less they are drinking better.”

He said this was evident in the growth of low-alcohol and no-­alcohol drinks, with his company last week booking $1m in sales of no-alcohol products at BWS.

All major categories of drinks experienced growth in 2021. The trend towards spirits continued, with this category increasing at more than 20 per cent following similarly strong growth in 2020. The ongoing shift to premium products was also seen across many categories. There was particularly strong growth in craft beer, champagne and gin.

Online sales increased 34.7 per cent to $859m in 2021 and now account for 8.4 per cent of total retail sales, up from the prior year’s 6.9 per cent.

At its pubs arm, despite the challenges of lockdowns, sales were up 7.3 per cent at $1.4bn, while EBIT increased by 49.1 per cent to $261m with Covid-19 having significant impacts on both the current and prior years.

In the prior year, extensive Covid-19 restrictions were first introduced in March last year and full closures were in place for much of the fourth quarter.

“The strength of this year’s result has demonstrated the resilience of our business model and the commitment of our team to living our purpose and values and delivering for their customers and communities,” Mr Donohue said.

The company is committed to growing its portfolio of stores. The store network was selectively expanded in the 2021 fiscal year and at the end of the period there were 251 Dan Murphy’s stores and 1392 BWS stores in Australia.

This represents a net increase of 33 stores during 2021. At the same time, Endeavour invested in 26 hotel renewals and five hotel acquisitions.

Endeavour fell 15.5c to $7.055.