Yamba BWS

Sales up but margins down for Endeavour Group

August 27, 2020
By Alana House

Endeavour Group has announced its total sales grew at 23.2% in Q4, with higher in-home consumption due to government restrictions significantly limiting on-premise consumption. However, margins were lower in Q4 due to COVID-19 impacts.

Among the factors affecting margins were a mix shift to value products and larger pack sizes, as well as the increase in online sales having a higher cost to fulfil.

The group’s full-year results show total liquor sales increased by 9.9% to $9.3 billion for the year, with comparable sales increasing 7.9%.

Strong sales growth was seen from the end of March, when on-premise restrictions came into effect, in contrast to a softer pre-COVID performance in Q3 which was impacted by bushfires across many parts of NSW and Victoria, and a subdued trading environment in Q2 and Q3.

Brad Banducci

Woolworths Group CEO, Brad Banducci (above), said: “At our half-year results in February, we spoke about the many challenges the communities we operate in had faced including drought, bushfires, the White Island tragedy in New Zealand and unrest in Hong Kong. At the time, no one could have imagined how the rest of the year would unfold with the devastating impact of COVID-19.”

BWS social distancing

“Our main priority for F21 is making COVIDSafe a part of everything we do. I again want to recognise the way our team has continued to respond to the ongoing challenges, and I continue to be inspired by our team’s collective commitment to do the right thing.

“COVID-19 had a material impact on the Group’s financial performance for the year. After strong first half Group EBIT growth of 11.4%, EBIT growth in H2 was distorted by COVID.

“The closure of Hotels for much of the last four months of the financial year led to a material decline in its H2 EBIT compared to the prior year.

“However, the impact of the closures was partially offset by strong sales-driven EBIT growth across our retail businesses, despite materially higher customer and team safety costs.

Endeavour Group sees “dramatic” sales lift

Endeavour Group was created in February following an internal restructure and merger of the Woolworths Group’s retail drinks and hotels businesses.

“Despite a slower initial sales uplift than food, Endeavour retail sales increased dramatically from late March and continued throughout Q4,” Banducci said.

“Dan Murphy’s was particularly strong as its range and value resonated with customers. F20 EBIT increased by 5.7% but H2 EBIT growth was lower than H1 due to higher operating costs and some negative mix impacts.

“Following a Government directive, all of Hotels’ venues were shut on 23 March. Venues began to reopen from June but continue to operate under various levels of restrictions depending on the state, with all Victorian venues again closed from 5 August.

“The closures had a material impact on sales and EBIT with a loss before interest and tax of $52 million in H2 compared to EBIT of $144 million in the prior year. For F20, Hotels EBIT declined by 51%.”

Banducci said Woolworths continues to pursue a separation of Endeavour Group and this is expected to take place in calendar 2021.

Online sales boom

EndeavourX’s investment in digital and fulfilment capabilities delivered normalised online sales growth of 28.6% to $637 million in F20, with online penetration increasing to 6.9%.

In Q4, online sales growth accelerated due to COVID-19, increasing by 47.8% on a normalised basis compared to the prior year, achieving penetration of 7.1%.

Both BWS and Dan Murphy’s delivered strong sales growth with BWS online sales doubling in H2, albeit from a lower base.

The increase in online sales had an impact on margins, as they required a higher cost to fulfil.

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