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Highlights
- Share Price Drop: Endeavour Group shares fell 6% to $4.21 after releasing its half-year results.
- Revenue Decline: Group sales slipped 0.7% to $6.6 billion, with Retail sales down 1.5%.
- Profit Under Pressure: EBIT dropped 10% to $595 million, while net profit after tax fell 15.1% to $298 million.
- Dividend Cut: The interim dividend was reduced by 12.6% to 12.5 cents per share.
- Mixed Outlook: Retail sales remained soft early in H2, but Hotel sales grew 4.7%. Management expects improvement as inflation eases.
Shares of Endeavour Group Ltd (ASX:EDV) tumbled 6% to $4.21 in Friday morning trade following the release of its half-year results for the six months ending 5 January 2024. Despite significant pockets, the Dan Murphy’s and BWS owner grappled with weaker consumer spending and supply chain disruptions, dragging profits lower and forcing a dividend cut.
Retail Sales Hit by Consumer Slowdown and Supply Chain Issues
Group sales declined 0.7% to $6.6 billion, primarily due to a 1.5% fall in Retail sales to $5.5 billion. The company cited subdued consumer spending in Q1 and an estimated $40–$50 million in lost sales from Victorian supply chain disruptions during the critical end-of-year trading period.
Despite the challenges, there were bright spots:
- Dan Murphy’s achieved record sales in the week before Christmas.
- BWS posted its best-ever sales in the week leading up to New Year’s Eve.
These results highlight the enduring strength of Endeavour’s brands, even in a tough trading environment.
Hotels Business a Silver Lining
In contrast to retail struggles, Hotel sales climbed 3.3% to $1.1 billion, with momentum building throughout the half. Management reported higher sales across all core categories:
- Gaming: Significant growth, especially in Queensland.
- Food & Bars: Boosted by the pub+ loyalty program and busy social occasions like Father’s Day and Christmas.
- Accommodation: Benefited from acquisitions and property redevelopments.
This diversification helped soften the impact of retail weakness, though not enough to prevent a double-digit profit decline.
Profit Decline and Dividend Cut
Despite a gross margin improvement to 34.9%, the company’s EBIT fell 10% to $595 million. Management blamed operating deleverage from lower sales and $13 million in one-off restructuring costs, tied to:
- The new Jimmy Brings–Milkrun partnership.
- Integration of Shorty’s into Dan Murphy’s.
- Support office restructuring for efficiency gains.
As a result, net profit after tax plunged 15.1% to $298 million, prompting the board to cut the interim dividend by 12.6% to 12.5 cents per share (fully franked).
Outlook: Optimism Despite Ongoing Retail Headwinds
Looking ahead, Endeavour reported mixed early signs for the second half:
- Retail sales declined 0.8%, still impacted by supply chain disruptions.
- Hotel sales jumped 4.7%, with growth expected to continue, supported by EGM fleet upgrades.
Despite ongoing retail softness, management remains cautiously optimistic:
"We operate in resilient categories and expect Retail market conditions to improve as inflation moderates. Our price and value leadership should drive stronger sales momentum in H2."
The company is also prioritizing cost savings and operational efficiency, with a focus on capital discipline to preserve balance sheet strength.
