Endeavour share price drops on half-year profit weakness

Consumers continue to spend big at Dan Murphy's but higher interest rates are weighing on its profits.

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Endeavour Group Ltd (ASX: EDV) share price is falling on Monday.

In morning trade, the drinks giant's shares are down 2% to $5.17.

This follows the release of the company's half-year results.

Couple look at a bottle of wine while trying to decide what to buy.

Image source: Getty Images

Endeavour share price tumbles on results

  • Sales up 2.5% to $6,667 million
  • Earnings before interest and tax (EBIT) up 2.6% to $661 million
  • Profit after tax down 3.6% to $351 million
  • Fully franked interim dividend flat at 14.3 cents per share

What happened during the half?

For the six months ended 31 December, the Dan Murphy's owner reported a 2.5% increase in sales to $6,667 million. This reflects a 2.5% lift in Retail sales to $5,583 million and a 2.7% increase in Hotels sales to $1,084 million.

Endeavour's Retail segment's growth was driven by an increase of 2.9% from Dan Murphy's and BWS. Management notes a particularly strong performance across the key retail sales events of Cyber Week and the Christmas period.

On a comparable sales basis total Retail grew by 1.8%, while BWS and Dan Murphy's combined comparable sales growth was 2.1%. Endeavour's Ecommerce sales grew 6.2% to 9.2% of total Retail sales.

Endeavour's EBIT increased 2.6% to $661 million for the half. This reflects a 4.3% increase in Retail EBIT and a 1.6% lift in Hotels EBIT.

Unfortunately, higher finance costs weighed on its profits during the period. Finance costs were up 28.6% to $153 million due to higher interest rates. This ultimately led to Endeavour's profits after tax falling 3.6% to $351 million.

But that didn't stop the Endeavour board from holding its fully franked interim dividend at 14.3 cents per share.

Management commentary

Endeavour's CEO, Steve Donohue, was pleased with the half. He said:

Our first half result demonstrated the resilience of Endeavour Group. Group sales grew by 2.5% to $6.7 billion, with Dan Murphy's and BWS both driving increased Retail sales, and an improved food and bar offering delivering growth in Hotels sales. Group EBIT increased to $661 million, benefiting from our disciplined focus on cost optimisation, including $53 million in savings from our endeavourGo program, and gross margin management.

Dan Murphy's strengthened its position as Australia's preferred drinks destination for events through the festive season, with customers continuing to respond to our great range and Lowest Liquor Price Guarantee. We also opened four new large format stores in the half, taking our popular offer to even more customers. We continue to report market-leading customer metrics and our My Dan's membership program now has 5.4 million active members, with record high customer engagement.

Outlook

Management advised that the second half has started relatively flat.

Through the first seven weeks, trading activity in Retail was up 0.3%. This reflected subdued sales in January, followed by an improved start to February, which saw sales growth of 1.5% over the first three weeks of the month.

In Hotels, sales have remained steady in the third quarter, which is typically a quieter period following the festive season. For the first seven weeks of the half, it recorded year-on-year sales growth of 1%.

The Endeavour share price is down 9% over the last 12 months.

Motley Fool contributor James Mickleboro has positions in Endeavour Group. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Earnings Results

Excited couple celebrating success while looking at smartphone.
Earnings Results

Soul Patts shares push higher on profit jump and 28th dividend increase in a row

This stock has lifted its dividend each year for almost three decades.

Read more »

A happy woman smiles as she looks at a tablet in a room with green plant life around her.
Earnings Results

Soul Patts 1H26 earnings: Strong growth, dividend up again

Soul Patts’ 1H26 results show continued portfolio growth, resilient cashflows, and another dividend increase.

Read more »

Two male ASX investors and executives wearing dark coloured suits sit at a table holding their mobile phones discussing the highest trading ASX 200 shares today
Communication Shares

Guess which ASX 200 telco stock is jumping 7% today

Investors have responded positively to the release of this telco's results.

Read more »

An investor looks happy holding a finger to his computer screen while holding a coffee cup in a home office scenario.
Earnings Results

Tuas half-year result: profit leaps as revenue and subscribers grow

Profit rose 173% and revenue increased 26% as Simba drove growth and M1 acquisition advanced.

Read more »

Beautiful young couple enjoying in shopping, symbolising passive income.
Earnings Results

Guess which ASX 300 stock is jumping 17% on strong results

This stock is catching the eye on Tuesday with a strong gain.

Read more »

One girl leapfrogs over her friend's back.
Earnings Results

Premier Investments shares jump 8% on results and big interim dividend

Peter Alexander is performing but Smiggle is struggling.

Read more »

A young woman looks happily at her phone in one hand with a selection of retail shopping bags in her other hand.
Earnings Results

Premier Investments posts $101.7m half-year profit and lifts dividend

Premier Investments delivers steady 1H26 profit and 45c dividend, with growth for Peter Alexander and a strategic reset at Smiggle.

Read more »

A man holds his head in his hands after seeing bad news on his laptop screen.
Earnings Results

New Hope shares crash 12% on profit crunch and big dividend cut

Let's see what the coal giant reported this morning.

Read more »