Sales jump at Endeavour Group’s pubs and hotels, but drop at bottle shops after lockdowns

Business is booming at Endeavour’s string of hotels but menu price hikes are on the way and sales at Dan Murphy’s and BWS have dropped.

Endeavour Group CEO Steve Donohue at the Dan Murphys cellar store in Prahran. Picture : David Geraghty/ The Australian

The easing of lockdown restrictions and a sense of newly won freedoms that encouraged drinkers to head to pubs and hotels has helped deliver sales growth at Endeavour Group’s hotels arm but when patrons sit down for a steak and wine they could notice a lift in menu prices.

Endeavour chief executive Steve Donohue said his business, which operates 344 pubs and hotels around Australia as well as the Dan Murphy’s and BWS liquor chains, had faced higher red meat prices which had been passed on to patrons.

“We have had to put up our steak prices by $1 or $2, which we don’t like doing,” Mr Donohue said on Thursday as Endeavour, which was once part of Woolworths until it was spun out last year, posted a 2.1 per cent drop in March quarter sales to $2.73bn from a year earlier, due largely to a later Easter this year compared to last year.

Drinks prices were also shifting higher, but not by a considerable margin as yet, he said.

Early in the quarter the hotels and pubs arm struggled as lockdowns slowly ended and some customers were nervous to take those first few steps into a venue, but that later improved towards the end of the quarter to help a strong bounce back in overall sales for the quarter.

“It was really tough in January in truth, and that fed into a bit of the first couple of weeks of February,” he said.

While the impact of the floods and adverse weather conditions across Queensland and NSW dented operating conditions, Endeavour’s pubs and hotels business still managed to post a 3.8 per cent lift in sales to $405m for the 13 weeks to April 2.

But that hit sales of wine, beer and spirits at Dan Murphy’s and BWS – which did well during lockdowns as venues were closed and people drank at home – with Endeavour’s retail arm reporting a 3 per cent slide in sales to $2.32bn.

Mr Donohue said the business overall performed well during the quarter, which didn’t include Easter trading this year.

“We continued to build strong customer engagement, with both BWS and Dan Murphy’s recording improvements in customer metrics. These results are once again delivered within the context of an uncertain operating environment with extreme weather events, ongoing supply chain disruptions and growing inflationary pressures creating new challenges.”

He said Covid-19 continued to impact operations.

“This was particularly evident at the beginning of the quarter, when consumer hesitancy reduced patronage in our hotels, while team availability was a challenge in both businesses.”

Excluding the impact of Easter, group sales would have been broadly in line, down 0.3 per cent.

Floods in Queensland and NSW caused extensive damage to a small number of our stores and hotels in the quarter, according to Endeavour.

Its Dan Murphy’s Lismore store was submerged in the flooding in the first week of March. In addition, 10 BWS stores as well as the Breakfast Creek Hotel in Brisbane and Westower Tavern in Ballina were significantly impacted.

Endeavour said it booked $9m in flood damages in the third quarter, which reduced EBIT. This included direct costs as a result of the floods, such as clean up costs and asset write-offs, as well as an estimate of lost profits when stores and hotels were not able to operate.

Dan Murphy’s opened one store during the third quarter, bringing the total store network to 258. In BWS, five stores were opened, thirteen renewed and four closed, ending the quarter with 1,411 stores.

Endeavour also owns Pinnacle Drinks, which owns a portfolio of wines including Krondorf Wines, Oakridge Wines, Chapel Hill Wine, and Mr Donohue said the recent South Australian vintage “has been a great vintage” with good volumes and “great quality”.

In Victoria the vintage quality was “very high” but volumes were lighter and this could lead through to higher prices.