Endeavour profit falls to $52m

Endeavour Group’s decision to reset shelf prices at Dan Murphy’s has restored sales momentum but taken a heavy toll on earnings, with annual profit down 87.8 per cent to $52 million for FY26 after $372 million in pre-tax significant items covering restructuring, asset writedowns and the exit from its winery portfolio.

Group sales rose 1.3 per cent to $12.2 billion. Underlying EBIT fell 8.7 per cent to $845 million and underlying net profit fell 14.8 per cent to $363 million.

Endeavour Group managing director and CEO, Jayne Hrdlicka, said, “The F26 full year result reflects a period where the Group started to implement the actions required to execute its strategy and realise the potential of our portfolio of Retail and Hotel assets.”

Margin the cost of price leadership

Retail sales increased 0.7 per cent to $10 billion. Dan Murphy’s and BWS sales lifted one per cent to $9.8 billion on comparable store sales growth of 0.5 per cent, with combined growth improving from 0.7 per cent in the first half to 1.4 per cent in the second.

The price reset, introduced at the end of the first quarter and detailed at the group’s first investor day since the Woolworths demerger, cut underlying gross profit margin by 86 basis points. Retail underlying EBIT fell 17.6 per cent to $464 million, an EBIT margin of 4.6 per cent, down 103 basis points. Endeavour attributed the margin decline to lower shelf prices and elevated promotional activity across the market.

For suppliers, the group flagged that competitive promotional activity remains elevated in FY27, particularly in the online channel. Online sales grew 34.8 per cent to $1.1 billion and now account for 11.6 per cent of Dan Murphy’s and BWS sales, with about 61 per cent of those orders collected in store.

Specialty sales fell 14.6 per cent to $199 million, reflecting the closure of the Prowine bottling facility, the integration of Shorty’s into Dan Murphy’s and the shift of Jimmy Brings to a partnership model with Milkrun. The group confirmed it will exit the majority of its Pinnacle Drinks winery and vineyard portfolio, including Chapel Hill, Oakridge and Josef Chromy, retaining three sites tied to private and exclusive label production. Endeavour flagged the divestments in June.

Significant items and the Melbourne DC

The $372 million in pre-tax significant items, $311 million after tax, comprises $194 million in portfolio rationalisation and asset impairments, $80 million in writedowns of non-current assets, $58 million in restructuring and strategic review costs, and a $40 million provision related to the Melbourne Liquor Distribution Centre.

That provision follows Woolworths Group’s decision to close the MLDC in September 2028, ending the supply chain services contract under which Woolworths runs warehouse operations for Endeavour at the site. Endeavour is contractually required to reimburse Woolworths for stranded workforce costs.

Hotels carry the earnings

Hotels sales rose 4.2 per cent to $2.2 billion with comparable sales up 4.4 per cent. Underlying EBIT increased 4.1 per cent to $462 million at a margin of 21 per cent, close to the $464 million delivered by a retail business five times its size.

Bar sales grew 5 per cent and food 2.6 per cent. Gaming revenue rose 4.4 per cent, supported by about 2000 new electronic gaming machines, and accommodation revenue rose 9.3 per cent. The group completed 38 venue renewals, up from 27, and now operates 351 hotels.

Dividend and balance sheet

The board declared a fully franked final dividend of 1.2 cents per share, taking the full year to 12 cents, down 36.2 per cent, and a payout ratio of 59 per cent under the revised policy of 50 to 75 per cent of underlying net profit. No dividend reinvestment plan will operate for the final dividend. Shares trade ex-dividend from 1 September with payment on 1 October.

Underlying operating cash flow of $933 million represented cash realisation of 93 per cent, down 17 percentage points. Underlying free cash flow was negative $182 million after capital expenditure of $448 million. Net debt rose $198 million to $1.9 billion, a leverage ratio of 1.9 times on a pre-AASB 16 basis, with $990 million in undrawn committed facilities.

FY27 a year of investment

Sales in the first seven weeks of FY27 were up 4.6 per cent in retail and 2.2 per cent in hotels, or two per cent excluding the estimated uplift from the FIFA World Cup and other one-off events in July. Hotels sales growth has since softened across food and bar, gaming and accommodation, and the group expects renewal disruption to weigh on hotel earnings.

Capital expenditure of between $550 million and $650 million is planned for FY27, including up to $120 million over three years on structural remediation across the hotel network. The $300 million cost out target by FY29 was reaffirmed, with $100 million of that due in FY27 and initiatives covering 70 per cent of the FY27 target already executed. Endeavour plans to add eight Dan Murphy’s stores and close two BWS stores.

“F27 will be a year of investment for the group as we continue to execute the key initiatives required to transform all aspects of the business and establish a platform for sustainable future earnings growth,” Hrdlicka said.

The group flagged continued uncertainty in consumer spending, citing cost of living pressure, the impact of the ongoing Middle East conflict on fuel prices, a declining housing market and the potential for higher interest rates. Endeavour reported softer first half earnings in February as the price investment began flowing through.