Endeavour Group has reported a strong FY23 and promising results for the first quarter of FY24, albeit with mixed results for the retail portfolio.
In a speech to Endeavour Group’s shareholders, CEO Steve Donohue relayed the favourable results of FY23.
“In FY23 we operated for the first time in three years without pandemic related disruptions, however, we, like other companies, continued to navigate an unpredictable market and an evolving regulatory landscape,” he said.
Donohue explained that one challenge that the business is facing is the changing expectations of customers, noting that today’s customers expect a fast, seamless and convenient purchasing experience.
Despite the volatile economic environment, Endeavour Group had an impressive FY23, with group sales reaching $11.9 billion, up 2.5 per cent compared to last year. Additionally, earnings before interest and taxes (EBIT) were up 10.7 per cent, surpassing the milestone of $1.0 billion.
“Overall in FY23 the group delivered a strong result, reflecting our focus on delivering stability and value since the demerger [from Woolworths Group],” Donohue said.
While the overall business performed positively in FY23, results were mixed for the retail portfolio.
“In the retail business, we generated $9.9 billion in sales, a slight softening of 1.8 per cent from the prior financial year, reflecting the cycling of a strong first half as we normalised from pandemic driven highs. Despite macroeconomic factors being more challenging in the second half of the year, sales momentum actually improved with sales increasing by 0.7 per cent in H2, supported by strong customer metrics,” said Donohue.
In addition, retail EBIT declined at 1.2 per cent to $658 million, but the EBIT margin improved by four basis points, which Donohue attributes to solid investments and controlled operational costs.
“Our FY23 financial performance reflects the strength and stability of earnings derived from our core businesses: it confirms the customer appeal of our brands, particularly Dan Murphy’s, and the resilience of our businesses as we continually navigate change,” he said.
The adoption of customer membership has increased significantly, with a 15.6 per cent increase in My Dan’s membership to 5.2 million active users, and the BWS app active base increasing to 400,000 users.
“Supporting this, we’ve made advancements in our digital and omnichannel capabilities that enabled us to better understand and engage with customers at the right place, and at the right time. My Dan’s continues to lead the market with a 79 per cent scan rate,” says Donohue.
Over the year, Endeavour Group completed 122 store renewals, including the upgrade to the BWS 4.0 store format, and opened eight new Dan Murphy’s stores and 18 new BWS stores.
Pinnacle Drinks also achieved $1.7 billion in retail sales in FY23, backed by its 730 Pinnacle owned and exclusive brands. Additionally, the Paragon Wine Estates portfolio grew with the acquisition of Shingleback Wines in McLaren Vale and Cape Mentelle in Margaret River.
Projections for FY24
Donohue is aware that the economic climate of FY24 is likely to be a difficult one, but is confident that Dan Murphy’s and BWS will continue to perform well.
“In FY24, we expect macroeconomic conditions to continue to be challenging, with heightened inflation increasing the cost of labour, supply chain, lease and energy costs. As consumers face continued cost of living pressures, we expect that they’ll continue to seek out value, while also looking for opportunities to enjoy new, quality products and experiences. We’ll therefore stay focused on delivering our lowest price proposition at Dan Murphy’s; [and] outstanding value, service and convenience at BWS,” said Donohue.
First quarter results have been released, and retail sales grew by 1.9 per cent, with a combined 2.6 per cent increase from Dan Murphy’s and BWS. My Dan’s membership and the store’s Lowest Price Guarantee continued to encourage sales.
“Over 600,000 active members joined the My Dan’s membership program in the past 12 months, gaining access to our proactive price beats and reflecting the program’s importance as cost-of-living pressures impact customers,” said Donohue.
He also highlighted the importance of continued omni-channel engagement and retail innovation.
“We’ll continue to connect with our customers through our brands, supported by increasingly integrated omnichannel experiences which drive earnings growth. We’ll further improve our existing retail and hotel networks and undertake innovation through examples like the new BWS 4.0 format and concept stores like ‘The Cellar by Dan Murphy’s’, to provide pathways to future growth. Alongside this, our Pinnacle Drinks business will remain responsive to fast-changing customer needs and continue to deliver returns on the capital we invest in it,” he said.