Dan Murphy’s and pubs owner Endeavour sees no signs of post-Covid slowdown

Drinkers toasted their new-found freedoms from Covid at Endeavour’s pubs and hotels, where it served 40,000 meals on Christmas Day to boost earnings.

Australians are likely sacrificing their streaming services and holding off buying expensive homewares to instead socialise with friends and family at the local pub, which is helping insulate pubs and liquor retail owner Endeavour Group from the worst of the economic slowdown.

Endeavour Group chief executive Steve Donohue, who oversees the company’s 349 pubs, 1434 BWS stores and 262 Dan Murphy’s outlets, said despite the nine hikes in official interest rates that have caused many households to tighten their belts belt tightening by many households, it was yet to translate into fewer sales at his sprawling hospitality and retail network.

“We have a degree of confidence in the continued demand from consumers for a social occasion which consists of a meal with your family or friends, a few beers at the bar, and the various other activities that people participate in at a hotel,” Mr Donohue told The Australian on Monday.

“Our business tends to be much more experiential and social in hotels, and an affordable luxury when it comes to the products that we sell in the retail (liquor) business … and in my view, and obviously I am biased but you do get great value for money at the pub, you get a substantial meal, that’s great quality and you get to enjoy it with your friends and family.”

Unveiling Endeavour’s interim results on Monday, which showed the continued uplift of the economy reopening as total sales rose 2.6 per cent to $6.5bn and profit for the December half lifted 17 per cent to $364m, Mr Donohue said he hasn’t as yet seen as yet any softening in consumer demand in the wake of interest rate hikes, soaring inflation and the mix of economic challenges now facing consumers.

To keep its halo as being value for money, Endeavour has held back some price rises including an important decision to hold off any price price increases in prices in the draught beer category for the moment.

“The fact that Australians are inherently social people continues to play out across the market and in our businesses as well,” he added. “I think we remain quite competitive and compelling for consumers who want to get to the pub and have a schooner and we intend to stay that way.”

Drinkers celebrated their new-found freedoms in the December half to eat and drink at pubs and hotels. Picture: David Geraghty/NCA NewsWire

In terms of its performance for the December half there was a continued rebalancing of its earnings split between liquor outlets and pubs, as drinkers celebrated their freedoms from lockdowns to drink at hotels and bars with friends rather than buying beverages at a store and taking them home.

This was evident in the performance of its hotels arm, which operates 349 pubs across Australia, with its sales up 55.3 per cent to $1.056bn and earnings more than doubling, up 111.6 per cent to $258m.

At its liquor chains – led by Dan Murphy’s and BWS – sales eased back by 3.7 per cent to $5.45bn as earnings fell 9.3 per cent to $418m for the first half.

Shares in Endeavour rose strongly on the result and the upbeat outlook, making it one of the highest climbing stocks on the market on Monday. Endeavour later closed up 4.1 per cent at $7.11.

The profit result was 9 per cent above market expectations and accompanied by strong sales momentum into the second half. Investors were also cheerful over its higher dividend, after Endeavour declared an interim dividend of 14.3c a share, up from 12.5c, and payable on March 20.

The company said in the first five weeks of the second half of 2023 it has continued to see trading stabilise across the group. Retail sales at its liquor stores were in line with prior year. Its hotels business also performed well in this period, with sales up 31.5 per cent on last year, which was impacted by reduced patronage and team shortages due to the Omicron outbreak.

“While we expect to see some volatility ahead, we have demonstrated our resilience and stability as a business. We have not yet seen any material softening in key customer indicators, but we are monitoring these closely as broader economic uncertainty continues.”

Endeavour said at its liquor retail arm, sales over the festive period were particularly strong, with both BWS and Dan Murphy’s delivering record sales in the weeks leading into Christmas and New Year’s Day.

Across retail, sales momentum improved through the half, with comparable sales improving from 7.5 per cent in the first quarter to 2.7 per cent in the second quarter. Consumer preferences for premium categories and new products have continued to underpin a strong gross profit outcome, the company said. Margin gains more than offset the impact of higher levels of promotion and increased supply chain costs.

In the half, it's My Dan’s loyalty program had 4.9m members.

In the first restriction free half in three years, customers returned to socialise in Endeavour’s hotels, which served more than 40,000 meals on Christmas Day alone. Event bookings in the lead up to Christmas were particularly strong, with multiple sold out live entertainment events.

Endeavour also announced Kate Beattie would be appointed as chief financial officer from June 26 as current CFO, Shane Gannon steps back from executive roles.

Originally published as Dan Murphy’s and pubs owner Endeavour sees no signs of post-Covid slowdown