The Endeavour Group Ltd (ASX: EDV) share price is sinking on Friday morning.
In morning trade, the $8 billion ASX 200 stock is down 6% to $4.21.
This follows the release of the Dan Murphy's owner's half year results.
ASX 200 stock sinks on results day
- Group sales down 0.7% to $6.6 billion
- EBIT down 10% to $595 million
- Group net profit after tax down 15.1% to $298 million
- Interim dividend down 12.6% to 12.5 cents per share
What happened during the half?
For the six months ended 5 January, Endeavour reported a 0.7% decline in group sales to $6.6 billion.
The release notes that Retail sales fell by 1.5% to $5.5 billion during the half. This reflects subdued consumer spending in the first quarter and an estimated $40 million to $50 million in lost sales due to the Victorian supply chain disruption. The latter reduced stock availability in stores during the peak end-of-year trading period.
Nevertheless, this couldn't stop Dan Murphy's from achieving a record sales result for the week preceding Christmas. Nor could it stop BWS recording its best ever sales performance for the week preceding New Year's Eve.
Hotel sales grew by 3.3% during the half to $1.1 billion with sales momentum increasing throughout the half. Management notes that higher sales results were achieved across all four key business drivers (food, bars, gaming and accommodation).
Gaming remains resilient, with strong growth achieved in Queensland. Food and Bars benefited from the successful launch of the pub+ loyalty program, as well as strong performance around key social occasions including Father's Day and Christmas. Accommodation delivered strong growth through acquisitions and redevelopments.
Although its group gross margin as a percentage of sales increased to 34.9%, this couldn't prevent its EBIT from falling 10% to $595 million. Management advised that this reflects operating deleverage from lower sales and the impact of $13 million of one-off restructuring costs relating to optimisation initiatives. This includes the new Jimmy Brings partnership with Milkrun, the integration of Shorty's into Dan Murphy's, and support office restructuring.
On the bottom line, net profit after tax was down 15.1% to $298 million. This forced the ASX 200 stock's board to cut its fully franked interim dividend by 12.6% to 12.5 cents per share.
Outlook
Management advised that sales growth for the first seven weeks of the second half was down 0.8% for Retail and up 4.7% for Hotels.
The company notes that Retail sales have been impacted by the ongoing effects of supply chain disruption. Whereas Hotel sales have accelerated in the third quarter. Renewals and upgrades to our EGM fleet are expected to underpin continued growth in Hotels.
Speaking about its outlook, management said:
We operate in resilient categories and we expect Retail market conditions to improve as inflation moderates. Our commitment to price and value leadership is expected to drive improved sales momentum in the second half. We are continuing to prioritise operating efficiency and cost savings. Capital discipline will support continued balance sheet strength.
