The Endeavour Group Ltd (ASX: EDV) share price just jumped 9% in reaction to the FY22 half-year result.
Endeavour is the alcohol business that was divested by Woolworths Group Ltd (ASX: WOW). It includes Dan Murphy’s and BWS. Endeavour also has hotel earnings.
Endeavour’s impressive HY22 result
The company reported growing profit, despite sales not growing:
- Group sales of $6.34 billion, down 0.3% year on year
- Online sales jumped 24.8% to $603 million
- EBIT rose by 3.2% to $556 million
- Net profit after tax (NPAT) grew 15.6%
- Interim dividend of 12.5 cents per share
Endeavour said that its first six months of trading as an independent business demonstrated the structural resilience of the group. Online sales improved profitability significantly. Retail EBIT grew by 10% year on year thanks to gross profit margin improvement and disciplined cost management.
Hotels earnings were impacted, but it’s expecting the business to rebound strongly when COVID-19 impacts reduce. Hotel revenue was up 1.9% to $680 million and EBIT was down 0.8% to $121 million. However, hotels sales over a 2-year period showed a drop of 26%.
Investing for growth
The company has been expanding its network. Three acquired hotels ‘came online’ during the half, one in NSW and two in Queensland.
Endeavour expanded its retail footprint by 24 stores, it also renewed 49 stores and 22 hotels.
The ASX share opened the first Dan Murphy’s 2.0 neighbourhood store in South Australia, including an express drive-thru.
Endeavour also entered into an agreement with Qantas Airways Limited (ASX: QAN) to supply Paragon Wine Estates products on domestic business class flights.
The company re-iterated it’s investing in digital, data, analytics and technology.
Outlook and my thoughts on the Endeavour share price
Endeavour said that sales in the first six weeks of the second half are tracking slightly behind FY21, with retail sales down 2% and hotels down 2.9%. Team availability has also been a challenge.
Management is confident that the actions it has taken and the investments it has made into hotels and stores, in the technology and online offering, will help it to keep building a strong and resilient business.
It’s an interesting business. I can see growing profitability by selling more stuff online, as well as a recovery for the hotels segment. I’m not sure about the medium-term direction of sales though. There was a COVID-19 boost that I’m not sure whether it will continue or not.