Endeavour Group has announced total sales growth was 4.7% in HY20 in what the company has described as a “subdued” drinks market, with the outlook for the second half continuing to be muted.
Woolworths Group’s HY20 results have also been dented by $80 million in wage remediation repayments to staff and incurred $51 million in one-off costs ahead of the planned demerger of Endeavour Group.
Before one-off costs, net profit from continuing operations at Woolworths Group rose 8.5% to $979 million in HY20.
Woolworths originally estimated staff underpayments were worth $20-$30 million a year and the cost of remediation across the group. However, the group now estimates the cost of remediation will be $265 million.
The review has now gone back five years, with analysis extended to include salaried store team members covered under the general retail industry award at Dan Murphy’s and BWS.
Woolworths Group Chairman, Gordon Cairns, said: “At last year’s AGM, I said that culture was critical to the success of Woolworths Group and part of a strong culture is to recognise when we have made mistakes and address them as quickly as possible.
“We deeply regret the salaried team member payment shortfalls and want to reassure the team and shareholders that we are addressing them as quickly as possible.”
Endeavour Drinks’ Q2 comparable sales growth was 1.8% following several store openings over the last 12 months including nine Dan Murphy’s in the half.
CEO Brad Banducci said: “Trading in Q2 was impacted by subdued market conditions and competitor promotional activity, particularly over the Christmas and New Year period. “
Sales were also impacted by bushfires across many parts of NSW and Victoria in December.
EBIT growth of 6.7% was supported by penetration growth of Pinnacle Drinks’ exclusive brand sales.
The company noted that Pinnacle Drinks acquired Chapel Hill Winery based in McLaren Vale, South Australia in October 2019.
“The purchase of Chapel Hill broadens Pinnacle’s participation in the premium and regional Australian wine segments through Paragon Wine Estates supporting the growth of exclusive brands,” Woolworths stated.
Spirits sales up, Champagne down
Growth was seen in the Spirits category, particularly in gin and vodka. However, wine volumes, particularly Champagne, were “more subdued”.
Beer sales in the drinks market were “solid”, supported by the growing popularity of craft and mid-strength beer.
“Hotels had a very strong half with total sales growth of 6.2%, comparable sales growth of 4.7% and EBIT2 growth of 8.3%,” Banducci said.
“All categories improved sales with Bars and Food the highlights. In Q2, sales also benefitted from the strong execution of Christmas and New Year events.”
Endeavour X’s investment in digital platforms and convenience offerings delivered online sales growth of 15.4% to $321 million in HY20, with online penetration increasing to 6.7%. In Q2, online sales increased by 11.3% with online penetration of 6.9%.
My Dan’s increased to four million members in December with scan rates above 50%.
A new BWS app launched in September with On Demand now available in more than 700 stores.
“It will be an exciting and busy second half for Endeavour Group, as we work towards the separation of the business,” Banducci said.
Both Dan Murphy’s and BWS plan to open six to 10 new stores in the coming year to retain Endeavour’s lead in the drinks market.
Dan Murphy’s has also been trialling new store concepts aimed at accelerating innovation in its drinks business to better meet rapidly changing customer needs.
“The trading environment in drinks is likely to remain subdued in the short-term; however, as the market continues to premiumise, there are areas of potential growth (craft, eCommerce) that we need to continue to capitalise on,” Banducci concluded. “In Hotels, we will focus on maintaining momentum after a strong first half.”
