The Endeavour Group Ltd (ASX: EDV) share price has lost its fizz. It’s down 10% after handing in its FY22 result and giving comments about FY23.
Endeavour is the liquor and hotels division that was divested out of Woolworths Group Ltd (ASX: WOW). It owns businesses like Dan Murphy’s and BWS.
Endeavour’s FY22 result
Here are some of the highlights from the result:
- Group sales flat at $11.6 billion
- EBIT (EBIT explained) rose 2.8% to $924 million
- Net profit after tax (NPAT) grew 11.2% to $495 million
- Earnings per share (EPS) rose 11.3% to 27.6 cents
- Final dividend of 7.7 cents per share, up 10%
- Full year dividend of 20.2 cents per share, being a payout ratio of 73.1% of net profit
Endeavour said that the retail segment of its business had an “exceptional” first half and the hotels segment “came back strongly” in the second half.
This result was achieved despite the impacts of COVID-19, severe weather events, team shortages and a range of supply chain disruptions.
During the year, it bought five new hotels and completed 30 renewals, while also improving its retail drinks network which included 32 net new stores. It also bought Josef Chromy Wines during the period.
Investing for growth
The company says that it’s investing in its future, with a focus on digital, its network and group optimisation.
It grew its My Dan’s active members by 15% to over 4.5 million. Endeavour said that it enhanced its digital experience, including ‘personalised’ My Dan’s offers and BWS promotional programs.
The business also progressed its hotel digitalisation, including the rolling out of its ‘order and pay at table’ technology. It also introduced legislated facial recognition technology in all South Australian hotels. Endeavour also launched the ‘Dan Picked’ subscription service and ‘Dan’s Gifting Hub’.
Dan Murphy’s introduced new store formats such as The Cellar and neighbourhood stores.
Trading update and outlook
In the first seven weeks of FY23, the company has seen a “continued recovery” in trading for hotels and the trends in retail are “consistent with a return to normal patterns of trade”.
Compared to the same period in FY20, which was before COVID-19, retail sales were up 12.7% and hotels sales were up 13.4%. Endeavour said that sales comparisons to last year are “not meaningful” due to the restrictions in place.
It’s expecting the retail drinks and hospitality markets will “continue to return to normal” over the course of FY23.
Endeavour said that while the return of social connection and events are “positive” and reflected in its first seven weeks of trading, it pointed to a number of factors that could impact the business. It named inflation, limited team availability and the potential for supply chain disruption as possible negatives.
Final thoughts on the Endeavour share price
Investors have punished the company after this update. The recovery of the hotels division seems likely as it compares against COVID locked down periods. However, I’m not sure how the liquor division will perform after the strong growth seen during the COVID years.
I think the business could have a solid future, but I’m not sure what a good price for the ASX share is because it’s hard to say what the long-term growth rate will be. Maybe other investors have a better view on the business. Due to that, there are other ASX growth shares I would rather buy.
