Endeavour has lifted sales and earnings over 2024

Consumers might be stretched, but they are still clinging on to treats of going to the pub or picking up a bottle of wine, boosting Endeavour Group’s results.

Endeavour Group chief executive Steve Donohue at the Crows Nest Hotel in Sydney. Picture: Supplied

Endeavour Group boss Steve Donohue says “there is more to do” at the liquor store and hotels operator as it navigates through a tougher trading environment, with the company pulling on a number of levers in the year ahead to rein in costs, widen margins and grow sales.

Unveiling a full-year result that saw a slight dip in net profit and a soft trading start to fiscal 2025, but countered by a surprising maintaining of its dividend, Mr Donohue said the owner of Dan Murphy’s, BWS, 350 pubs and a portfolio of wine and beverage businesses needed to outperform the market – and this was what shareholders expected.

“There is always more to do, we are never satisfied with the results we get and when you look at our net profit this year we were disappointed not to be able to grow it,” Mr Donohue told The Australian after Endeavour posted a 3 per cent decline in full-year profit $512m as revenue rose 4 per cent to $12.309bn.

“We can point to interest rates (interest on its debt) but our task is to improve shareholder outcome and we were pleased to be able to hold the dividend in that respect … and if you look at the investments we have made to manage costs, grow margin and grow sales, we need to continue to leverage those investments and get better outcomes as years go by.

“And that’s my reflection on the period where we are now, that while the market may be soft it is our role to outperform the market.”

That softer market was evident in the trading update which showed that over July and early August sales at its retail outlets grew by just 0.6 per cent and hotel sales increased 2 per cent as cost of living pressures and household budgets looking to cut back on discretionary spending slowed Endeavour’s retail and hotels momentum.

A slightly lower than expected net profit for 2024, although it was within company guidance, added to softer sales since July to trigger a more bearish sentiment among investors with Endeavour shares slide 6.87 per cent to $5.15.

The fall was cushioned somewhat by the better than expected dividend, which was held at 7.5c per share, and payable on October 10.

For fiscal 2024 at its retail arm, which includes the Dan Murphy’s chain and BWS, sales rose 3.4 per cent to $10.246bn as earnings rose 4.1 per cent to $685m. On a comparable store basis, sales for BWS and Dan Murphy’s grew by 1.1 per cent.

The retailer’s popular MyDan’s loyalty scheme grew to 5.4 million users, up 250,000 for the year, with an 83 per cent scan rate in its stores.

Endeavour’s retail arm, which includes Dan Murphy’s, saw sales rise 3.4 per cent in FY24. Picture: Dan Peled

At its hotels, which operates 350 pubs, more than 12,000 gaming machines and a growing network of adjacent accommodation for tired patrons, sales rose 4.2 per cent to $2.063bn as earnings lifted 2.3 per cent to $438m. It said the gaming market remained resilient, with its gaming sales growing broadly in line with the market, with the exception of Victoria, which was impacted by our early adoption of the government’s changes to trading hours.

Endeavour, which also owns a portfolio of wineries, the Langton’s wine auction house and beverages distributor Pinnacle Drinks, was able to bolster its group financial performance by hitting $100m in savings.

Mr Donohue said while cost of living pressures were an obvious headwind for the company consumers, transactions were holding up well, especially at its Dan Murphy’s chain.

“One of the key observations is the performance of Dan Murphy’s, and we said this at the last update, the holding up of transactions in Dan’s is very encouraging and we tend to see customers, particularly in the retail business, spend about the same, so basket sizes are holding up as well.

“In the broader market, you’ll find that the frequency of shop is the thing that might be changing a little bit, we keep an eye on that. It is a bit harder for us to tell in the hotel environment, because we don’t look at it through a single customer lens, we look at it through how much draft beer have we sold, and so on, but in that context, gaming has proven really resilient. Gaming has held up really strong.”

Mr Donohue said a standout of the result was the continued strong performance of its accommodation offer.

“There has been a really strong performance of accommodation, because it’s great quality, great value. I stay at them all the time, they are excellent places to stay.”

He said a new hotel in Queensland which included a 40-plus room accommodation was generating 20 per cent-plus return on investment.

“So it is a key part of the hotel renewal strategy, accommodation, either as part of the renewal runway or stand-alone accommodation developments we are trying to tap into as we go.”