Endeavour Share Price Declines Sue to Q1 Sales Shortfall - Kalkine Media

October 30, 2023 07:48 PM AEDT | By Team Kalkine Media
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Amidst a challenging market environment, the Endeavour Group Ltd (ASX: EDV) is encountering headwinds, with its share price dipping by 1.5% to $4.94 in morning trade. This downturn comes as both broader market weakness and a mixed trading update have converged to influence the performance of this ASX-listed consumer stock. 

Share Price Dips Amid Mixed Results  
In terms of the latter, Endeavour Group recently revealed that its sales for the first 14 weeks of FY 2023 demonstrated a 2.1% increase compared to the same period last year, amounting to $3,091 million. The ASX EDV's retail business, which includes renowned brands such as Dan Murphy's and BWS, reported a 1.9% increase in sales, reaching $2,538 million. The quarter commenced on a strong note for the company; however, sales growth tempered somewhat during August. Nevertheless, in the final two weeks of September, the momentum gained traction and has continued into the second quarter. 

For both BWS and Dan Murphy's, the quarter witnessed an increase in shopping frequency and average item prices, effectively compensating for a reduction in items per basket. Furthermore, the average price inflation in the quarter moderated from its peak in the fourth quarter to approximately 5% year-on-year. During this period, the company opened 11 new BWS stores and closed four, resulting in a net increase of seven stores. A new Dan Murphy's store was also inaugurated in Bulimba, Queensland. 

Online retail sales for Endeavour Group recorded a growth of 2.8% during this period, and these online sales now account for 8.7% of total sales. 

The company's hotels business also reported a 2.8% revenue increase, reaching $553 million. Throughout the quarter, weekly sales remained relatively stable, with growth in bars, food, and accommodation. These gains were partly offset by a slight decline in gaming, though sales momentum has carried into the second quarter. 

Expectations and Market Challenges 
Despite the generally positive performance, the update from Endeavour Group fell slightly short of expectations. Notably, the slower-than-expected growth in e-commerce was a surprise. In this regard, Goldman Sachs pointed out that the company's 2.8% revenue growth in e-commerce contrasted with Coles' remarkable 32.2% growth in liquor online sales. This implies potential further market share losses in the online sector for Endeavour, despite any gains made in the offline segment. Understanding how the company leverages its digital initiatives and customer loyalty programs to enhance average revenue per user (ARPU) remains a key question. 

Endeavour's CEO's Optimism 
Steve Donohue, the CEO of Endeavour Group, expressed his satisfaction with the quarter's performance and optimism for the future. He highlighted that the company's brands continue to resonate with customers and emphasized strong plans for the upcoming festive season, including significant events like Black Friday and Cyber Monday, as well as the traditional peak associated with Spring Racing, entertaining, and holiday gifting. Despite recent market challenges, the company remains committed to providing a memorable experience for its customers, reflecting the resilience of ASX consumer stocks in the face of uncertainty. 


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