Pub sales up as bottleshops fall for Endeavour Group after supply chain issues

Pub patrons are piling into their local for a beer and meal, but Endeavour has flagged that has come at a cost to retail sales growth for its bottle shops.

Endeavour Group executive chairman Ari Mervis says despite former Virgin CEO Jayne Hrdlicka not joining as its new CEO until January she will be open to discuss issues with the company before that. Picture: Jane Dempster

Patrons piling into pubs to celebrate St Patrick’s Day, Easter and watch the footy helped lift food, beverage and gaming turonver for ASX-listed Endeavour Group.

However, sales at its liquor retail chains Dan Murphy’s and BWS declined.

Still wearing the bruises of industrial action at Woolworths’ warehouses before Christmas, with the supermarket giant handling much of its supplies, Endeavour’s third quarter sales struggled and it forecast “flat to modest” retail sales growth for its bottleshops in the remainder of fiscal 2025. That reflects the reality of an economy where consumers remain under cost-of-living pressure.

There has also been an uplift in promotional and discounting activity in the liquor retail industry, which Dan Murphy’s has been forced to match through its ‘lowest price guarantee’ but could come at the cost of thinner margins.

Releasing its third quarter sales performance on Monday, Endeavour’s struggling flagship stores Dan Murphy’s and BWS drove a 3.1 per cent slide in third quarter sales to $2.33bn for Endeavour’s retail arm, which was softer than some analyst expectations. But this was countered by a robust 5.1 per cent boost in hotel sales for the quarter to $512m. Endeavour operates 354 hotels and is also building up a network of co-located accommodation sites.

Total quarterly sales for Endeavour, which was spun out of Woolworths in June 2021, and also owns wineries, Langton’s auction house and a beverages manufacturer, fell 1.7 per cent to $2.84bn.

UBS analyst Shaun Cousins said: “Third quarter retail sales (were) below and hotels sales slightly above versus market … fourth quarter trading to date improved yet retail guidance suggests downside risk to market.”

Incoming Endeavour CEO Jayne Hrdlicka with Endeavour Group chairman Ari Mervis. Picture: Jane Dempster

This mixed performance – where hotel and pubs patrons are spending up on counter meals, beer and pokies machines but customers of liquor stores are putting less in their baskets – will be a challenge for incoming Endeavour chief executive Jayne Hrdlicka when she officially starts her tenure at the pubs and liquor store owner on January 1 next year.

Delivering the latest quarterly sales was executive chairman Ari Mervis, who will lead the company until Ms Hrdlicka arrives and has taken charge of the pubs and drinks business since the retirement of former CEO Stephen Donohue in March.

“In the third quarter hotel sales improved while off-premise demand remained subdued and our retail business continued to recover from the impact of supply chain disruption,” Mr Mervis said.

He said Endeavour’s bottleshops had to have the right prices and remain competitive with others as they dialled up discounting, but Dan Murphy’s and BWS also needed to offer the right portfolio of drinks for shoppers to restore and drive momentum in the business.

“We are in a very competitive market and we will compete,” he added, reflecting on the higher discounting in the market seen in the third quarter and concerns among analysts it will eat into profit margin.

Endeavour operates 1722 stores.

Mr Mervis said Endeavour had made an encouraging start to the fourth quarter.

“In retail we delivered an Easter sales result in line with Easter sales in the previous year and in hotels we continued to see good growth across all drivers (food, bars, gaming and accommodation).”

However, due to the constraints on the average shopper, Endeavour has forecast “flat to modest” retail sales growth for its bottleshops in the remainder of fiscal 2025 as the consumer remains under pressure.

In hotels and pubs, positive sales momentum has continued, supported by resilience in gaming and strength in food and bar sales. Endeavour is targeting mid-single digit hotel and pubs sales growth in the balance of the fourth quarter.

Mr Mervis said he was still forecasting some growth in sales for Dan Murphy’s and BWS – rather than further declines – despite the absence of key events in the fourth quarter like Easter and Anzac Day which helped drive sales in the previous quarter.

While inflationary pressures are gradually easing, cost inflation will remain a headwind for both retail and hotels in the remainder of the second half, the company said.

Mr Mervis told analysts that Ms Hrdlicka would make herself available to the company to consult on various operational and strategic issues despite her not officially starting as CEO until January. Some analysts were concerned she wasn’t starting at the company for another nine months and at a time where there were plenty of economic and structural challenges for the group.

Shares in Endeavour ended flat at $4.16.