Woolworth’s Endeavour Drinks segment procures and resells drinks to customers in Australia. It operates 1,610 stores under Dan Murphy’s and BWS brands, as well as Cellarmasters and Langton’s online platforms.
This morning, Endeavour Drinks (ASX: EDV) debuted in the ASX following the demerger from parent company Woolworth. Woolies still owns over 14% in Endeavour, however, the spin off will give EDV a chance to not be bogged down by the structural headwinds in supermarket business and continue growing. Afterall, EDV has been the fastest growing and the most profitable segment at Woolworth. EDV will now also focus on building its hotel business by expanding their footprint and by the addition of new pokies machines.
Given the importance of Endeavour drinks to Woolworth’s income and growth, WOW shares have taken a massive hit following the demerger. At the time of writing this, WOW shares are down 11% today and currently trading at $37.80 a share. In the grand scheme of things however, the spin-off is a win-win as Woolworths can now be rid of the ESG issues surrounding the alcohol and gaming businesses. Both businesses were held back until now, and they can now finally concentrate on their respective niches and focus on growth.
For investors, this is extremely good news as WOW is now primarily a supermarket and will be affected by the tailwinds and headwinds in the segment. Endeavour’s recent growth rates and profitability will be an attraction for investors chasing growth in the medium to long-term.
EDV shares have begun trading on the ASX today at a stock price of over $6 and a market cap of around $12 billion.
Get stock tips with our Market Experts. We help self-directed investors and self-managed super funds (SMSF) make smarter investment decisions and get better returns. Fill in your details and download your free Report instantly for the Top 3 Dividend Stocks to buy in 2021! Click here now!