Liquor firm cuts back on wine to focus on pubs growth
The owner of two of the country’s best-known bottle store chains is about to undergo major changes under its new leader to improve performance and attract more “energetic socializers.”
Endeavor Group, which owns retail liquor outlets Dan Murphy’s and BWS and hundreds of pubs across Australia, plans to cut costs of $300 million, including $100 million already planned for the new financial year.
“Our operating model is not right,” CEO Jayne Hrdlicka, who joined in January, said at investor strategy day on Wednesday.
“We now have clarity on why the operating model is not working, what needs to be different, and how to deliver it.”
Endeavor will now focus on increasing retail revenue by “strengthening its price leadership”; This potentially signals cheaper drink prices, improving bars’ performance and reducing costs by $300 million.
Investments will be increased through renovations, renovations and repositioning of hotels or bars to meet the needs of “energetic socializers,” gamers and others seeking comfortable and family-friendly environments, according to a slide deck presented to investors.
It will also exit much of its existing winery and vineyard portfolio, which includes the Chapel Hill, Oakridge and Josef Chromy wine brands under its Pinnacle Drinks business.
The idea is to use the remaining Pinnacle business to support bottle shops and venues, focusing on high-performing brands that generate the best returns.
But Endeavor will also reduce its dividend payout ratio to between 50-75 per cent of the group’s underlying net profit to ensure it has the funds it needs to support its planned turnaround.
This means potentially lower dividends for investors for the foreseeable future.
Endeavor shares fell about 2.5 percent to $3.01 just before noon, after hitting an all-time low of $2.95 just after the stock market opened. The all-time high was $8.40 in August 2022.
The group’s profitability, along with its share price and quarterly sales, have been on a downward trend over the past three years.
Ms Hrdlicka’s aim is to stop this and prepare the company for stronger profit growth in the coming years.
“We have a significant opportunity to get the fundamentals right in both the retail and hotel business,” he said.
Earlier this month, Endeavor warned that the conflict in the Middle East, which began with the US attack on Iran in late February, was threatening supply chains and driving up fuel and freight costs.
It also warned that cost-of-living pressures were putting pressure on sales of drink, which is a discretionary product unlike food, and food and bar sales in pubs.
Endeavor will announce its 2025/26 results in August.
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