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Endeavour Group chief executive Steve Donohue was on Wednesday night looking forward to a good turnout at his company’s hotels for the Matildas’ semi final against England.

Mr Donohue’s company owns the Dan Murphy’s and BWS liquor store chains, and has more than 350 hotels around Australia.

He is the latest of a number of executives this reporting season who say consumer spending is holding up better than expected after a year of interest rate rises.

In discussing his company’s results, which showed a rise in net profit for the year to June 30 of 6.9 per cent to $529 million, Mr Donohue used the word “resilience” several times when discussing the outlook for customer spending, assuring analysts that this was holding up into the first weeks of the new financial year.

“We are encouraged by the resilience in our trading performance,” he said.

“Whilst not immune to shifts in consumer sentiment and economic conditions, trading has been resilient across the final quarter of F23 and in the first six weeks of the new financial year,” he said of the company’s retail business.

Analysts were disappointed that the company’s results came in lower than the market’s expectations of around $543m and as a result its shares slid.

With interest rates still rising the market is watching closely for further signs of a slowdown in consumer spending.

The good news for Endeavour shareholders was that Australians are heading back to hotels to socialise, post Covid-19.

The company, which operates the ALH Hotel Group, sold 86,000 meals across its premises on Mother’s Day and reported it had sold 172,000 tickets to events over the year.

But sales from its retail outlets were affected by the big fall off in online alcohol sales which boomed during Covid-19.

The company’s e-commerce sales of alcohol jumped from $500m in the 2021 financial year to $1bn in the 2022 financial year but came down to $850m in the 2023 financial year.

Mr Donohue is not worried about this, and regards it as natural shift back from the Covid-19 period.

The results of the group, which is the largest owner of gaming machines in the country, are also affected by changing regulation of the industry which are being tightened around Australia.

Looking ahead, Mr Donohue said the company could do well in a more cost-conscious world, whereby consumers were opting for the Dan Murphy’s assurances of offering the lowest prices for alcohol and people would head to pubs for meals rather than expensive restaurants.

Signs that inflation and interest rates might be near their peak were helping to keep up confidence, heading off fears last year and earlier this year of the economy falling into a recession.

WAM Capital lead portfolio manager Oscar Oberg told a client briefing on Wednesday that the Australian market was already pricing a recovery in consumer-exposed stocks given that investors generally looked between 12 and 18 months ahead.

“Don’t get me wrong, the economy is going to have a very tough period, but all the feedback we get on the ground is we just need confidence,” Mr Oberg said.

“The consumer just needs confidence that rates are going to stabilise.

“From our perspective we’re not even looking for interest rates to fall, we just need them to stabilise and people can readjust their budgets and then start spending again.”

In the minutes of the latest Reserve Bank board meeting released this week, the central bank noted that the Australian economy was expected to grow “well below its trend pace” for the rest of this year. Growth was expected to trough at 1 per cent by the end of this year before gradually picking up to about 2.25 per cent by the end of 2025.

The RBA has been watching the fall in retail sales in June, but noted that this followed an increase in May – and that the volume of retail sales has been “essentially unchanged since September 2022”.

But it noted that the economic slowdown and higher interest rates was having very different effects on households, depending on their exposure to debt.

The relatively tight labour market had also put a floor on consumer confidence although wages were still growing.

But while a recession is not on the cards, the outlook is far from certain.

There have been quiet lay-offs across sectors such as financial, tech, and the building and construction industry – which have yet to play through into the broader economy.

The net impact for companies is the need for a critical focus on cost control going forward.

At its analyst briefing, Mr Donohue was quizzed about his company’s cost reduction plans.

The company’s profit rise came on the back of only a 2.5 per cent rise in sales to $11.9bn.

Mr Donohue was frank about his strategy. “We like to grow our bottom line faster than our top line,” he said.

This could be a mantra for the broader corporate Australia.

He pointed out that the company had made cost savings of $90m in the two years since its demerger from the Woolworths group and was targeting another $200m over the next three years.

With wages and other costs rising, the ability of companies to hold down costs would be a critical factor in underwriting profits in the year ahead.

The once-highly lucrative daigou market of Chinese shoppers buying and exporting infant formula is in the rearview mirror for A2 Milk, as the company continues to navigate around COVID-19 disruption and China’s declining birth rate.

A2 Milk on Monday revealed double-digit increases in net profits, earnings and revenue for the 2023 financial year. However, it also pointed out ongoing shifts in consumer habits in its core market in China, as parents move away from English-label baby formula (down 6.1 per cent) in favour of Chinese-label products (up 26.9 per cent).

Chief executive David Bortolussi said even though cross-border trading, freight availability and costs had improved, and more Chinese international students were returning to Australia, he anticipated the daigou channel to recover to just “half of what it was” in its pre-pandemic heyday.

“There [are] a lot of things that are conducive to a daigou recovery. Unfortunately, we’re not seeing a significant rebound in that,” Bortolussi said.

Amid a relatively tight labour market, Bortolussi said Chinese international students had plenty of options other than daigou shopping to supplement their income while studying in Australia. Meanwhile, Chinese parents were also increasingly opting to buy their infant formula online and in-store.

“I can be reasonably definitive about that: [the daigou channel] will not get back to the same size that it was,” Bortolussi said. “We’re hopeful that there may be a recovery but by no means are we dependent on that or planning for that to happen. That would just be a nice thing to occur for everybody.”

The $3.9 billion company has changed its daigou strategy a number of times: in late 2021, A2 Milk signalled it would reduce its reliance on daigou shoppers, but less than a year later planned to rebuild its daigou community, as the channel was “turning a corner”. Bortolussi’s comments on Monday indicate the shift away from daigou shopping looks more permanent.

He also warned of challenges ahead in the Asian country, where fewer babies are being born, competition is expected to tighten, and prices are expected to come under further pressure. A2 Milk’s strategy has been to ramp up advertising and marketing campaigns to raise brand awareness against a backdrop where China’s overall infant formula market size has shrunk 14 per cent.

China’s fertility rate – already one of the world’s lowest – dropped to a record low of 1.2 in 2022, which has prompted Beijing to introduce measures like financial incentives and better childcare facilities to address the problem.

A2 Milk’s net profit after tax lifted 26.9 per cent to $155.6 million for the 2023 financial year, while earnings rose 11.8 per cent to $219.3 million. Revenue increased by 10.1 per cent to $1.6 billion.

Despite revealing double-digit growth, A2 Milk’s numbers undershot some analyst expectations. The gloomy outlook did not inspire shareholders, who will not receive a dividend, and sent the company’s share price tumbling 13.6 per cent on Monday.

The company expects to notch $2 billion in revenue by the 2026 financial year and achieve “low single-digit revenue growth” for the 2024 financial year. The business will continue to be challenged by declining birth rates in China as well as an industry-wide transition of all Chinese-label brands to new infant formula standards, known as GB registration, which will put pressure on prices.

A2 Milk is taking steps to grow its presence in the US, South Korea and other Asian countries, and will develop products aimed at seniors to capture the ageing population in China.

Dairy company A2 Milk has reported a “strong” full-year result with double-digit sales and earnings growth despite challenging market conditions in China.

For the year to June 30, sales grew 10.21 per cent to $1.6 billion with tax-paid profit up 26.2 per cent to $144.8 million and EBITDA of $219.3 million, up 11.8 per cent.

Australia and New Zealand sales were down 30.2 per cent due to a change in distribution strategy while China & other Asia region sales grew 37.9 per cent. US sales were up 27.1 per cent and Mataura Valley Milk brand sales were up 9.2 per cent.

The company also grew sales and improve online platform rankings in China and English label IMF in Double 11 and 618 key sales events.

The business received approval from China’s SAMR for pre-registration of China-label IMF products and launched new products in all categories.

MD and CEO David Bortolussi described the results as a “remarkable achievement” despite a 14 per cent decline in the core China market.

“The China market has become increasingly challenging as a result of lower birth rates and increased competitive intensity. Notwithstanding, we are well-positioned to continue to invest and grow share in FY24 to emerge in a stronger position when the market recovers.”

ResMed’s decision a year ago to stockpile components to beat a pandemic-fuelled supply chain crunch allowed the company to keep up with demand for its sleep apnea machines but it has come at a cost.

Chief executive Mick Farrell says the company’s profitability is not where many analysts expect – even 12 months later.

“In the heat of the supply chain crisis, I just couldn’t get availability of semiconductors from the traditional suppliers and we were redesigning our products. We did all that,” Mr Farrell said.

“But then we bought components at a tough time and supply was tough, so we paid quite high prices. Freight rates 12 months ago were high, so all that inventory is now working its way through to our sold products … and when we sell them, we take the cost of what we purchased at.

“Twelve months ago, everyone said that was fantastic – freight rates are high, doesn’t matter, just take care of the patients. Now, they’re saying ‘but wait a second why isn’t profitability not where I want?” Well that’s why.”

ResMed’s revenue soared 23 per cent to $US1.1bn ($1.68bn) in the three months to June 30 as pandemic-induced challenges slipped further into the rear view mirror. But the result was slightly below analysts’ expectations.

The price of the company’s ASX-listed chess depositary interests fell 9.4 per cent to $30.67 on Friday, against a 0.2 per cent rise across the broader sharemarket.

Mr Farrell said “unconstrained availability of our market leading cloud connected flow generated platforms” had allowed the company to meet demand in its key global markets, with the exception of its latest product AirSense 11.

“We are ramping up and improving the availability of our best in class AirSense11 platform, which will gain further geographic regulatory approvals throughout the fiscal year and steadily increasing supply also throughout the fiscal year 2024 and beyond,” he said.

“Although challenges within the post-Covid supply chain haven‘t completely been mitigated yet, we expect ongoing steady improvement in component and end product supply in the quarters ahead.

For the full financial year, revenue surged 18 per cent to $US4.2bn, compared with analyst estimates of $US4.2bn. Meanwhile net profit vaulted 15 per cent to $US897.6m.

Wilson analyst Shane Storey said the company didn’t deliver the earnings beat that was expected. “Fourth results were broadly in line with our forecasts but 5 per cent below expectations in the US market hence the 9 per cent sell-off we see there in the aftermarket,” Dr Storey wrote in a note to investors.

“Investors should take advantage of this sell-off, following 4Q23 results. We are seeing another round of short-termism on the stock, bemoaning the gross margin impact of success.”

The company’s shares, which are also listed on the New York Stock Exchange, slumped from $221.23 to as low a $US199 in US trading before settling to $US219.95.

“We’d received feedback that AS11 (AirSense 11) ordering had improved in recent weeks but device supply may stay on an allocation basis for the next few quarters,” Dr Storey said.

“US device sales grew 25 per cent and this outperformance continued to weigh on GM (gross margin) mix, as did securing componentry for a planned AS11 acceleration.

“Competitive dynamics continue to weigh in ResMed’s favour, but the risk of things suddenly changing – Philips re-entry … remain a dampener on sentiment until AS11 remobilisation is realised.”

In January last year, Mr Farrell said the pandemic-induced supply chain crunch was limiting a windfall of up to $US350m that the company expected to reap from a product recall from rival Philips. Nevertheless, in August last year ResMed’s net profit surged 64 per cent as it reaped a windfall of up to $US70m from Philips’s recall.

Asked if ResMed could maintain its edge over its rival as Philips returned products to key markets, Mr Farrell believed it could.

“I think the reputation hit and the time to market is going to be a very slow progress for them, country by country.”

ResMed’s earnings per share for the year to June 30 jumped 11 per cent to $US6.44 versus analyst estimates of $US6.52.

Gross margin contracted 80 basis points to 55.8 per cent. Mr Farrell said he could “reverse engineer” the company’s margin by slowing product sales.

“But we’re not going to do that when a patient needs care,” he said.

“I will never turn down a patient if there‘s demand for a patient. We‘re going to take care of them, even if it’s a slightly lower gross margin. And by the way, it is really good gross profit dollars and we get to take that cash flow, as you saw a really strong cash flow in the quarter, and reinvest it in R&D.

“We continue to significantly grow our impact each quarter, improving over 160 million lives in the last 12 months, well on our way to helping 250 million lives in 2025.”

The company will pay a quarterly dividend of US48c per share on September 21.

Anna Croft has been appointed as Coles’ new chief commercial officer, effective January next year.

Croft is the current COO of Mecca Brands where she helped transform the retailers’ business operations for health and beauty.

She comes with 20 years of industry experience and has worked with leading retailers such as Tesco, Coles, Mecca Brands and WHSmith in the UK and Australia.

Coles CEO Leah Weckert said she is delighted that Croft is returning to Coles with significant leadership experience in both local and international retail.

“Anna will play an essential role with our team and suppliers to deliver exceptional quality products, innovative exclusive brands and convenient meal solutions for our customers at a great value.”

Casual brand Crocs has reported record quarterly sales of more than US$1 billion, reflecting a 12 per cent increase in constant currency terms over the previous year.  

The company’s growth was driven by Asia, where sales increased by 33.2 per cent, or by 39 per cent on a constant currency basis, and North America where direct-to-consumer (DTC) comparable sales grew by 12.9 per cent year on year.

Revenue of $160.1 million from Europe, the Middle East, Africa, and Latin America decreased by 0.2 per cent or 1.4 per cent when measured in constant currency.

“We achieved record quarterly revenues of over $1 billion, representing growth of 12 per cent on a constant currency basis to prior year,” said Andrew Rees, CEO. 

“Both the Crocs and HeyDude brands continue to gain share and bring in new consumers with our comfortable offerings, as evidenced by DTC growth of 26 per cent in the second quarter. We continue to invest behind our strategic priorities that are driving profitable growth.”

The business anticipates a consolidated sales increase of 12.5 per cent to 14.5 per cent in the third quarter of this year compared to 2022, translating to revenues of roughly $4 billion to $4.065 billion at exchange rates as of the end of the most recent reported period.

Washington | American fast-food chain Wendy’s has inked a deal with the world’s largest food franchisee and the new owner of Pizza Hut in Australia, Flynn Restaurant Group, to build 200 local Wendy’s stores starting in two years’ time.

In a deal foreshadowed by The Australian Financial Review in February, the Nasdaq-listed burger giant – the world’s third-largest after McDonald’s and Burger King – will pose a fresh challenge to local operators such as Hungry Jack’s.

Hungry Jack’s’ founder, billionaire Jack Cowin, has questioned Wendy’s’ ambitions in Australia after its foray in the 1980s failed.

Abigail Pringle, president for Wendy’s international and chief development officer, said that following the positive reaction from Sydneysiders to a one-day Wendy’s pop-up event in 2021, and the overwhelming interest in its arrival, the burger company was ready to formalise a deal.

Ms Pringle said Australia is a “high priority, strategic growth market” and that she was ready to take on competitors such as Mr Cowin.

“We clearly have [Mr Cowin’s] attention. But he does not have mine,” Ms Pringle said.

“I’m focused on the customer. And we’re focused on delivering on a great brand experience. I’d love to invite Jack to Wendy’s when we launch and maybe he can really experience for the first time a fresh, never frozen Wendy’s hamburger.”

In 1982, Wendy’s arrived in Melbourne, an expansion set up by one of its then major US franchisors, the Tennessee-based Johnston Southern Corporation.

Ms Pringle said the operating environment had changed significantly in 40 years and the Flynn Restaurant Group had “incredible experience” in the restaurant space.

Ms Pringle said Wendy’s competitive edge would come through freshness of product, supply chain advantages (it already has existing supply chains in Australia for its Asian and New Zealand markets), new look stores designs and the strength of the world’s largest restaurant franchisee.

“Flynn has a strong leadership team, great culture, vast industry knowledge, success with our brand in the US, and we are confident that Flynn Restaurant Group is the right partner to unlock growth for Wendy’s in Australia.”

Flynn operates Taco Bell and Pizza Hut in the US, as well as 190 Wendy’s shopfronts in five states and Washington DC.

It owns and operates 2600 restaurants including Applebee’s, Panera and Arby’s and generated $US4.5 billion in sales last financial year with over 75,000 employees.

Wendy’s said the agreement with Flynn would drive growth in Australia “primarily after 2025, with the ambition to hit 200 restaurants across the country through 2034, through a combination of equity stores and sub-franchise partners”.

Wendy’s transaction with Flynn includes a master franchise fee and an additional income stream from each of the Wendy’s stores once in operation.

Flynn’s chief operating officer Ron Bellamy said he looked forward to expanding the brand and was in the process of redefining what Australians should expect from quick-service restaurants.

“It is a tremendous brand with significant untapped potential outside of the US and we think it is an especially great fit for Australia, given the savvy nature of the Australian consumer,” Mr Bellamy said.

Average gross annual sales for a franchised Wendy’s restaurant in the US was $US1.75 million ($2.7 million) in 2020, with a standard 4 per cent revenue royalty fee.

Wendy’s also has separate agreements for non-traditional locations, such as petrol stations, food courts, military bases and delivery kitchens.

Wendy’s has, in the past, used incentives to promote new restaurant development. This year, in the US and Canada, it offered royalty, national advertising and technical assistance fee waivers for up to three years for some operators.

Wendy’s also typically charges a standard technical assistance fee for newly executed franchisees of about $US50,000 for each new restaurant opened.

Ms Pringle said there had been “really great contenders” to take on the master franchise for Wendy in Australia and a long list of those who wanted to take on a smaller number of Wendy’s store franchises.

Subscription-based meal kit provider Marley Spoon plans to revise its full-year revenue guidance after sales plummeted on soft consumer demand.

For the quarter to June 30, net revenue fell 21 per cent to €86 million (A$141.31 million) while operating EBITDA slumped 161 per cent to A$3.94 million.

In Australia, net revenue grew marginally, up 1 per cent to $59.32 million while the US market reported a 9.1 per cent increase to $67.37 million.

In Europe, net revenue grew 16 per cent to $14.62 million however high inflation and interest rates have put pressure on the company’s conversion and early retention rates in the region.

During the quarter, the average order volume increased by 7 per cent benefiting from several revenue-enhancing activities along with price increases carried out last year.

Marley Spoon CEO, Fabian Siegel, said the results are “consistent” with the first quarter as consumer challenges coupled with price sensitivity and low consumer confidence impacted acquisition volumes and order frequency in the US and Europe.

Reflecting on the sentiments, CFO Jennifer Bernstein said persisting economic concerns have led to lower order frequency and a subsequent sales decline.

“We do see an improved trajectory throughout the second quarter and therefore anticipate more favourable spending patterns in the second half of the year.”

Aldi Australia has named Anna McGrath as its new CEO, succeeding former local chief Tom Daunt who became the business’ joint MD in May.

McGrath has been with the company for 17 years in various leadership roles and was the former group MD for both US and Australian businesses.

Of her appointment, McGrath said she is “honoured” to lead the business, adding that Aldi has always been focused on price leadership, but “it has never been more important than now”.

“We have a responsibility to maintain our price gap and show Australians, that are facing pressures within their family budgets, that they will achieve serious savings by changing their weekly shop to Aldi, without comprising on quality.”

According to third-party data, the company’s Price Promise helped contribute $3.1 billion in savings delivered directly to customers last year.

“We have a very strong strategy in place that is resonating with Australian customers, I’m looking forward to bringing Aldi savings to more and more households,” said McGrath.

The global boss of SodaStream says demand for at-home sparkling-water machines is still growing despite the recent failure of local competitor SodaKING and the broader slump in consumer spending.

Victoria-based SodaKING, founded in 2014 to sell the machines and gas cylinders, was placed into administration in early June, although it continues to trade.

SodaStream chief executive Eyal Shohat described SodaKING as a worthy competitor and said he was not happy to hear of its situation.

“I think what happened to them is quite unfortunate,” Shohat said during a visit to Australia last week. “It’s not a softening of the category. I know the numbers; the category’s not going down.”

SodaKING administrators are seeking a buyer for the business.

Shohat said being alone in the category would not be the best thing.

“The greatest form of flattery is competition ... We welcome competition. It also keeps us on our toes,” he said.

Data shows consumers are “trading down” branded items to home-brand and private-label goods given the rising cost of living and reducing spending on restaurant meals, takeaway food and coffees.

Shohat acknowledged the challenges to household budgets but indicated sales had increased since the start of the year.

“In the last year to date, so from January to today, we see growth,” he said. “We started to see a recovery in Australia; it’s actually quite an amazing recovery.”

SodaStream declined to provide sales or revenue figures.

It entered Australia in the late 1970s and has retained market dominance since. Local sales have also been supported by a global branding refresh the Israel-headquartered company launched late last year to reposition itself as a more upmarket product.

Its most recent financial report lodged with the Australian Securities and Investments Commission shows SodaStream’s profits after tax were $2.3 million in 2021, falling from $2.5 million the year prior.

As part of his visit to Australia, Shohat has been touring stores around the country selling SodaStream and said he was impressed by brand repositioning “coming to life” in retailers such as JB Hi-Fi, the Good Guys, Woolworths and Coles.

“I think Australia is the most advanced market in the SodaStream world to implement our new repositioning to elevate the brand to create this holistic ecosystem of beverage for consumers,” he said.

“This market here for SodaStream has been massively growing. We’re getting into more and more and more households all across Australia. Coming here and seeing this, it’s amazing.”

To capture consumer interest and spending dollars, SodaStream recently launched a global marketing campaign aimed at encouraging users to be more creative and experimental with their SodaStream flavours.