Dan Murphy’s and BWS owner Endeavour Group reports major profit hit

A strategic plan by Dan Murphy’s to cut liquor prices in order to boost sales is working, but coming at a cost to the business.

Endeavour Group, which owns the big box chain as well as the sprawling network of neighbourhood BWS stores, reported an 88 per cent slump in annual profits, dropping from $426 million to $52 million.

The result is partly due to a “back to basics” play at Dan Murphy’s, to return the brand to its roots as Australia’s go-to choice for low liquor prices under new chief executive Jayne Hrdlicka.

Hrdlicka is the former boss of Virgin Australia and landed at Endeavour this time last year with a brief to turn the underperforming business around.

Sales at BWS and Dan Murphy’s have since grown for 10 months in a row, hitting a record $10 billion last financial year.

Hrdlicka plans to fix that by cutting $300 million in costs from the business over the next three years to boost the bottom line.

“There is no doubt that sales are building in retail following our renewed drive on value and price leadership,” Hrdlicka said in a market update on Monday.

“There’s a lot of additional work underway in BWS and Dan’s to continue to stoke that fire.”

Dan’s and BWS continue to face strong competition from challengers including Liquorland, particularly in online sales, with recent promotions offering discounts of up to 20 per cent for orders placed online or via apps.

“We haven’t seen 20 per cent off before,” Hrdlicka said, acknowledging deep discounting is hurting the bottom line.

“I would hope that we’re not seeing too much more of that going forward but we can’t predict (that).”

Endeavour also owns 351 licenced venues across the country, including iconic watering holes like Brisbane’s Breakfast Creek Hotel.

It says sales across the hotels and pubs have slowed in recent months as consumers put less money across its bars amid high petrol prices, the housing wealth downturn and the threat of more interest rate rises.

However, the pubs did see an uplift in activity thanks to the recent football World Cup.