Shares in the company that owns Dan Murphy’s and BWS have hit a two-month low on news Endeavour Group is discounting to grow sales at the expense of its profit margin.
The two liquor store chains had $5.4 billion in sales in the 27 weeks to January 4, up 0.7 per cent from a similar period a year ago, Endeavour said on Tuesday.
But the group’s overall profit for the first half is expected to be between $400 million to $411 million, down from $437 million in the first half of 2024/25.
Jayne Hrdlicka, who began as the group’s new CEO on January 1 after leaving Virgin Australia, said the company made a deliberate decision to invest in lower prices to boost sales and customer engagement.
Endeavour was very pleased with the speed with which customers responded to lower prices and targeted promotional activity, she said.
Dan Murphy’s had record sales in December, with Christmas Eve setting a new daily sales record.
“The pricing and promotional decisions we have made in our retail business have generated positive sales results, delivering on our aim to better align the customer propositions for each of our brands to re-ignite top-line growth,” Ms Hrdlicka said.
“In a competitive market landscape, we have focused on reinforcing customer confidence in the value we offer across all channels, particularly in Dan Murphy’s unbeatable price and customer experience.”
Endeavour also owns more than 350 pubs across Australia, where sales were up 4.4 per cent to $1.2 billion, including a best-ever sales run in December.
“The holiday spirit across our hotels business was exceptional, enabling strong results,” Ms Hrdlicka said.
But RBC Capital Markets analyst Michael Toner said the sales update was a negative for Endeavour shares.
“In the face of structural top-line challenges and aggressive price competition in the retail liquor space, Dan’s has pulled the price lever to reinforce its value proposition,” he said.
This led to the company missing consensus earnings margin expectations by about half a percentage point.
In early trading, Endeavour Group shares were down 6.4 per cent to $3.565.