Endeavour Group (EG) has released its first quarter results and trading update, with the group saying its retail and hotel portfolios have delivered stable first quarter results in soft market conditions.
Those market conditions have seen the group highlight that the need to sell more products on promotion as consumers continue to down-trade is expected to impact profitability in its retail business.
EG Managing Director and CEO, Steve Donohue said: “Endeavour Group delivered a stable trading performance in the first quarter as cost-of-living pressures continued to impact consumer spending in our categories.
“This result demonstrates the value of our diversified portfolio, with the moderation in retail sales during the quarter offset by a stronger performance in hotels. Retail sales were in-line with the first quarter of the prior year and hotels recorded 2.5 per cent sales growth.”
Within the retail business, EG reported $2.5m in retail sales in the first quarter, with combined Dan Murphy’s and BWS sales of $2.4bn, which is in line with the first quarter of last year.
Donohue said: “After a positive start to the year, retail sales momentum slowed in September. During the quarter, promotional intensity lifted across the sector as customers became increasingly value conscious.
“In challenging market conditions, our retail business has continued to execute well, growing our market share, maintaining our best-in-class Voice of Customer scores and expanding the My Danʼs loyalty base to 5.5 million active members.
“In the near term, softer sales and a lower margin sales mix, resulting from both a higher percentage of sales on promotion and consumer downtrading, are expected to impact retail profitability.
“Continued inflationary pressure on operating costs is also impacting margins. As a result, the Group expects that Retail Operating EBIT margin1 in H1 will be between seven per cent and 7.5 per cent compared to eight per cent in H1 F24.”
EG reported hotel sales of $567m I the first quarter, which is up 2.5 per cent on the same quarter last year. Hotels made a positive start to the first quarter, delivering sales growth in July and August despite cycling the Womenʼs Football World Cup in the prior corresponding period. Sales momentum improved in September, driven by higher food and beverage sales over Fatherʼs Day, school holidays and the footy finals.
Donohue said: “We are encouraged by our performance in hotels, which has been underpinned by growth across all four key business drivers- food, bar, gaming and accommodation. This result reflects the ongoing efforts of our team to enhance our customersʼ experience across all aspects of our hotels offering. It also demonstrates the resilience of the Hotels segment and the ongoing attraction of meeting at the pub for social occasions, despite the pressure on household budgets.”
In its trading outlook, the EG statement to the ASX said that cost inflation “remains a headwind” for both the retail and hotel sectors, the statement also said, “the Group operates in defensive categories, is highly cash generative and has a strong track record of performing through the economic cycle”.
Donohue added: “Looking ahead, the second quarter remains an important period for the Group, featuring the annual Black Friday and Cyber Monday sales events as well as key social occasions including Spring Racing, the Christmas festive season, NewYear celebrations and summer entertaining.
“We are well prepared to execute successfully over the peak trading period by delivering the best prices, service and experiences for customers. Our 30,000 team members are committed to ensuring that we are the destination of choice for our customers as they gather with friends and family to socialise and enjoy the holiday season.”
