The Endeavour Group Ltd (ASX: EDV) share price is down 4% after providing a weaker-than-expected update.
Endeavour is a liquor and hotels business. It owns businesses such as Dan Murphy’s, BWS and ALH hotels.
FY26 first-half update
The company reported its performance to the ASX regarding the first 27 weeks of FY26 compared to the first 27 weeks of FY25.
Total first-half sales grew 1% to $6.68 billion, with hotel revenue growing 4.4% to $1.17 billion and retail sales growing 0.3% to $5.5 billion.
Within that retail number, Dan Murphy’s and BWS sales rose by 0.7% to $5.4 billion and specialty sales fell 16% to $109 million. Specialty includes sales from the Jimmy Brings / Milkrun partnership, Langtons and Pinnacle Drinks external customers.
Endeavour Group also reported its profitability numbers, which are expected to see a decline in the first half of FY26.
Retail EBIT (EBIT explained) is expected to decline from $370 million in FY25 down to between $323 million to $328 million.
Hotel EBIT is expected to rise from $262 million in FY25 to between $271 million to $275 million.
The ‘other’ EBIT was a loss of $37 million last year and the loss is expected to be between $37 million to $39 million this year.
Overall profit before tax, before significant items, is expected to be between $400 million to $411 million in HY26, down from $437 million in HY25.
It also reported it expects to report a $40 million significant item related to the provision of one-off costs related to the closing of the Melbourne Liquor Distribution Centre. The group has entered into a new 10-year contract for a replacement warehouse with a leading global supply chain provider at a new Victorian distribution centre.
What drove these numbers?
The company said that since the start of September, Dan Murphy’s and BWS together have delivered four consecutive months of sales growth, reflecting the group’s commitment to price leadership as a fundamental part of the customer experience, particularly in Dan Murphy’s. The second quarter combined sales grew by 2.2%.
Another highlight was a record sales month in December, driven by Dan Murphy’s biggest trading weeks leading into both Christmas and New Year’s Eve, with Christmas Eve setting a new daily sales record.
However, with the company focused on providing best-in-market pricing, combined with value-focused promotions, this led to the gross profit margin being 85 basis points (0.85%) lower than the prior year amid this strategy and elevated levels of promotional activity market-wide.
In hotels, the company saw an uplift in gaming and strong results from refurbished venues and positive trends in food and bar transactions. December was its strongest monthly sales result ever.
Final thoughts on the Endeavour Group share price
There is a lot of competition in the liquor space, but Endeavour has the scale to compete strongly and offer the best prices while still making decent profit. Its hotel business continues to perform, which is pleasing to see.
Alcohol concerns aside, this seems like a compelling time to invest, with the share price down 50% since August 2022. But, I wouldn’t expect a rapid recovery or huge profits. There are other ASX dividend shares that are more appealing.
