Woolworths announces plans to reposition Dan Murphy's

Woolworths is moving to reposition Dan Murphy’s following the chain performing below expectations in the first half of FY2019.

Brad Banducci, Woolworths Group CEO, said: “Endeavour Drinks’ sales increased by 1.8% and EBIT decreased by 6.4% [to $290 million] with Dan Murphy’s below expectations in a low-growth market impacted by cooler and wetter weather around key events and the timing of New Year’s Eve.

"Steve Donohue has assumed the role of interim managing director of Dan Murphy’s and will continue to work with the team to position Dan Murphy’s for the next horizon of growth. We have a clear plan in place focused on localised ranging, building ‘discovery’ into all aspects of the customer experience and being digitally-led."

Donohue, who was appointed MD of Endeavour Drinks in early 2018, has moved into Campbell Stott's role at Dan Murphy's and is focussing on curating the chain's range to suit traditional customers and Millennials.

Donohue started as a store manager in Dan Murphy’s when he was 19 years old and progressing into senior buying, merchandising and marketing roles in Dan Murphy’s, BWS and the broader drinks business.

Banducci also noted that Dan Murphy's was struggling to open new stores and that consumers were drinking slightly less, trading down and demanding more convenience.

"We saw material trading down from champagne to sparkling wine, which flowed through the results," he said. "It's not a business that needs to be turned around but needs to be reshaped for the future."

The company noted that further progress on this agenda is expected in the second half, but Endeavour Drinks’ EBIT for FY19 is expected to be below the prior year. 

Endeavour Drinks’ sales increased by 1.8% to $4.6 billion in HY19 with comparable sales increasing 0.9%. In Q2’19,
sales increased by 0.8% with comparable sales increasing by 0.2%.

Woolworths said BWS and Dan Murphy’s "outgrew a subdued market, particularly in the two largest categories of Beer and Wine."

Dan Murphy’s delivered double-digit growth in online with new offerings, including the launch of 30- minute pick-up and on-demand delivery. Also, there are now more than three million My Dan Murphy’s members.

BWS maintained its "strong momentum", with enhancements to localised ranging and tailored Woolworths Rewards offerings.

The BWS store network grew to 1332 stores with 16 net new stores and the new BWS Renewal format was successfully extended to key urban standalone stores.

BWS’ convenience offering also continued to expand, with On Demand delivery now available in 500 stores and Pick up available across the whole network.

Jimmy Brings expanded its geographical reach, including launching in Brisbane during the half.

Gross margin was flat at 22.8% with trading margin improvements offset by higher freight costs attributable to petrol prices and growth in home delivery.

Overall, Woolworths reported a 1% lift in first-half profit to $979 million, with comparable food sales growing 2.3 % in the half-year, below the 3.0% growth reported by Coles on Tuesday. 

However, Endeavour Drinks Group's 1.8% sales increase was ahead of Coles Liquor's 0.6% increase on the prior corresponding period.

“It was a challenging half across all of our businesses with subdued customer demand and volatile weather in the second quarter,” Banducci said.

The ALH result

ALH Groups hotels’ sales growth slowed as it cycled a very strong period of sales and profit growth in the prior year.

Bars and gaming sales growth was lower over the half while accommodation continued to grow strongly.

Sales improved in December, driven by bars and food. EBIT was marginally below the prior year due to lower sales
growth and the impact of business mix on gross margin.

The company noted: "During the half we implemented a number of changes to the way we operate to improve responsible gaming practices including the removal of the complimentary service of alcohol (in addition to states where previously prohibited)."