Endeavour Drinks Group (EDG) has reported a 4.5 per cent sales increase to $8.3bn in FY18, with comparable sales increasing by 3.6 per cent, as part of the overall Woolworths Group annual results.
The group reported that both BWS and Dan Murphy’s both delivered solid sales, which it said was driven by “effective executing of seasonal events and a significant contribution from attached BWS stores”.
Woolworths CEO Brad Banducci said: “Endeavour Drinks grew comparable sales by 3.6 per cent in FY18 with Easter-adjusted Q4’18 comparable sales growth of 2.8 per cent. Sales growth remained robust in the second half; however, EBIT growth was lower due to continued price competition impacting Dan Murphy’s.
“Steve Donohue was appointed as Managing Director in April with Martin Smith retiring at the end of the financial year. In FY19, we plan to further increase our investment in digital and data, leveraging learnings from WooliesX with focus on range, service and convenience.”
In detailing its performance over the financial year, EDG said: “Dan Murphy’s sales growth was supported by eight new stores and strong double-digit sales growth in online. BWS had a pleasing year driven by its range segmentation and participation in the Rewards program.
“It opened 18 net new stores in FY18 bringing the network to 1,316 stores, with a successful trial of the store renewal program’s integrated formats. Endeavour Drinks sales per square metre increased by 1.3 per cent with total sales growth of 4.5 per cent, offset by net average space growth of 3.2 per cent. Endeavour Drinks’ gross margin was flat at 23.1 per cent with margin improvements in BWS wine and spirits categories offset by a change in sales mix and a minor reclassification of costs between gross margin and CODB.”
Banducci also spoke about some of the ways that the Woolworths business and the trends it serves have evolved, saying: “We know that the present is very different to the way that we have operated historically: F18 was the year of pick-up for us. We decided to make sure that each one of our stores can provide a pick-up experience, so you can not only shop at the physical store, but you can shop the physical store as well. We activated that across every store inside Woolworths, except inside our Metro stores due to some constraints around space.
“That was enabled across every store, it has created a lot of growth for us, but it also creates an opportunity for the next generation of growth for us, importantly if you can do pick-up from a store you can do on-demand deliveries from a store. That’s the next generation of growth, that plus drive-throughs, so it’s a very important achievement for the year, but we do believe that on-demand is going to be critical as we go in F19.
“We think Amazon Prime is the key vehicle, we see them being successful with that in the US and we will simply need to be better at on-demand. BWS is actually leading the charge for the group on this and we have 340 stores where you can order, and get your chilled wine or beer delivered to you within less than two hours.
“We also bought a small business called Jimmy Brings which actually delivers within less than 30 minutes and the reason for that was to just force our team to confront the new world that we operate in and the need to get faster and faster and what is actually possible.”
Banducci also gave his summary of the year as a whole for EDG, saying: “It was a good year, but on the EBITS said we were slightly lower than our expectations had been. That is at least in part driven by the SouthTrade sale, which was in previous years’ numbers and was $9m. If you isolate for that you see profit growth slightly less than sales growth, but it was a challenging second half in some of our categories and we are hoping that as we reset our plans for FY19, you’ll see that narrative change.”
For ALH Hotels comparable sales growth was 3.7 per cent for the year or 2.8 per cent Easter-adjusted in Q4’18 with continued growth across all major parts of the business.
EBIT growth in the second half was more moderate than the first half, which the group said was because it “cycled a strong period of profit growth in the prior year”.