Endeavour Group Limited

Thank you for standing by and welcome to the Endeavour Group's F26 first quarter training update. All participants are in a listen-only mode. Endeavour Group's CEO, Kate Beattie, will provide some opening remarks followed by a question and answer session. All participants will need to press star 1 to ask a question. Only one question per person will be permitted. However, if time permits, participants are welcome to rejoin the question queue. I would now like to hand the conference over to Kate Beattie, CEO. Please go ahead.

Thank you and thanks everyone for joining us this morning. I'm Kate Beattie and I'm joined by our CFO Tully Ross. I'd like to start by acknowledging the traditional custodians of the land on which we're conducting this call today, the Gadigal people, and pay my respects to their elders past, present and emerging. I'll make some brief remarks on our first quarter trading update before taking questions. Our first quarter results saw improving momentum in retail sales and continued sales growth in our hotels business. In total, across the group for the 14 weeks ending 5 October, we delivered sales of $3.1 billion, down 0.3% on the prior corresponding period. In retail, total sales were $2.5 billion for the quarter, down 1.4% versus the first quarter of F25. This includes the impact of lower specialty business sales following the integration of Shorty's operations into Dan Murphy's, and the transition of Jimmy Brings to a partnership model with Milk Run in F25. Combined Dan Murphy's and BWF sales were $2.4 billion in the quarter, down 1% year-on-year. Following a soft start to F26, our retail sales trajectory improved with positive sales growth in September, which was supported by targeted and well-executed promotions during school holidays and the footy final season. During the quarter, we continued to strengthen our competitive position by reinforcing our best-in-market everyday low pricing on the key brands and products our customers value most, complemented by value-focused promotions and underpinned by Dan Murphy's lowest liquor price guarantee. More specifically, we have taken a number of proactive steps which are worth highlighting. Firstly, we have updated our product segmentation to ensure we are driving value through the products that matter most to customers and ensuring these are more prominent in our stores supported by increasing stock weight. Second, we have broadened our competitor set we use to benchmark our shelf prices across both BWS and Dan Murphy's in-store and online. Third, we have increased our in-store messaging to emphasise value and our commitment to beating competitor prices. Fourth, we are doubling down on Dan Murphy's brand messaging to ensure more customers are aware of Dan's lowest liquor price guarantee. And lastly, we have increased BWS's promotional offerings, including offering incremental value leveraging our everyday rewards partnership with Woolworths. This is through activations such as points booster offers above threshold spend levels and points multipliers on selected AppyDeals product purchases. The user experience for customers shopping our BWS products on the Woolworths website and app has also been significantly improved. We were pleased to see our team's focus on delivering great value, range and service continue to resonate with our customers. Dan Murphy's further strengthened its market leading voice of customer score by one point, up to 82, while BWS achieved its highest ever score of 79, up four points. Promotional intensity across the retail liquor market remained elevated throughout Q1, particularly in the online channel. Online sales grew 20.9% to represent 10.2% of our combined Dan Murphy's and BWS sales. Growth was driven by strong promotional activity, a more competitive delivery fee structure and strength in the ultra-convenience channel. Now turning to our hotel segment. In hotels, sales of $592 billion were up 4.4% versus the first quarter of F25, driven by growth across all four key drivers of food, bar, gaming and accommodation. Our continued investment in renewals, localised food and bar menus, new EGMs and expanded nightcap offering all contributed to this positive trading result and was reflected in higher customer satisfaction scores. Gaming remains resilient with our two largest markets of Victoria and Queensland exhibiting the strongest growth. Our overall performance has benefited from the installation of approximately 250 new electronic gaming machines in the first quarter in addition to the approximately 900 machines which were installed in the second half of F25. Pleasingly our gaming market share in Victoria continued to improve. Hotels continued to benefit from being a destination of choice for key events, notably sporting events and family occasions such as Father's Day. We continue to innovate our food and beverage offerings including our new summer menu which is focused on seasonal menu items and updated pub classics. Our pub plus loyalty app now has over 560,000 active users accounting for almost 30% of food and bar transactions. Members enjoy access to all-day, every-day draft beer specials and promotions such as our current October-long Pubtober offering of daily deals on food and beverage throughout the month. We continue to grow our renewals pipeline and to deliver strong renewal returns. We completed 10 renewals during the quarter, including six whole-of-venue repositionings. By way of example, at our full-year update in August, I mentioned we had just launched the Northern Grounds Hotel and De Dille Bar on the Queensland Sunshine Coast. This venue is now a top 10 venue for food and beverage nationally in our portfolio, up from outside the top 150, demonstrating the upside available to us through strong renewal execution. Turning now to second quarter trading and outlook. Pleasingly, the positive sales growth in retail which began in September has continued in October. We will continue to invest in maintaining a differentiated everyday price position as well as delivering incremental value through promotions, reinforcing our market leading retail customer value proposition. We expect promotional intensity across the retail liquor market to continue to be elevated through the second half. As a reminder, in the second quarter we will be cycling supply chain disruption in the prior year, which impacted both sales and our ability to invent promotional activity during the peak summer trading period. Hotels have also made a positive start to the second quarter. Sales growth in October is modestly below the Q1 trend, driven by beer pricing and event timing. Inflationary pressure on wages and elevated security costs, combined with increased depreciation and amortisation, remain a headwind to earnings growth in the half. We expect to install approximately 400 new GMs and complete a further 10 hotel renewals in the second quarter. Across both retail and hotels, our focus for the rest of the half will be firmly on execution across the social event season including sporting events and celebrations such as spring racing, the Ashes Series, Christmas and New Year festivities, as well as general summer socialising. As always, I'd like to close by thanking all of our Endeavour team members for their tireless efforts in delivering great value and experiences for our customers and guests. With that, I'll now hand back to the operator for any questions.

Thank you. If you would like to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you would like to cancel your request, please press star 2. If you are on a speakerphone, please pick up the handset to ask your question. As a reminder, only one question per person will be permitted. However, if time permits, participants are welcome to rejoin the question queue. Your first question today comes from Craig Wolfer from MST Marquee. Please go ahead.