Endeavour Group (ASX:EDV) outlined a first-half FY2026 performance that management said showed “green shoots,” with customers responding to a renewed focus on value in retail and continued momentum in the hotels portfolio. The company reported group underlying EBIT of AUD 563 million, at the upper end of the range previously provided in its January trading update, as hotels growth more than offset weaker retail earnings.
Group earnings, dividend, and significant items
Managing Director and CEO Jayne Hrdlicka said underlying earnings in the half were impacted by a decision to invest in lower shelf prices and to compete more aggressively in what she described as an “elevated promotional environment” in retail.
The board approved a fully franked interim dividend of AUD 0.108 per share, representing a 70% payout ratio of underlying NPAT.
Beattie also detailed a pre-tax net expense of AUD 45 million in significant items that was excluded from underlying earnings. This included:
- A AUD 40 million provision for estimated one-off cessation costs tied to the planned closure of the Melbourne Liquor Distribution Center in 2028.
- A AUD 4 million net gain from the sale of gaming entitlements, offset by hotel property impairments.
- AUD 9 million of advisory fees related to the company’s strategic review.
Retail: price reset drives share gains, margins compress
In retail, Endeavour reported sales up 0.2% to AUD 5.5 billion in the half, with momentum improving in the second quarter. Excluding specialty businesses, Dan Murphy’s and BWS delivered combined sales growth of 0.7% in the half. Beattie said combined sales for Dan Murphy’s and BWS grew 2.2% in Q2, or 0.6% when adjusting for an estimated AUD 45 million sales impact from supply chain disruption in the prior comparative period.
Hrdlicka said Dan Murphy’s reset shelf prices to re-establish “clear and meaningful price leadership” across stores and online, alongside increased promotional investment. She said this resonated with customers, delivering record purchase intent and value-for-money engagement scores, and supported “an all-time record sales month in December,” including the biggest trading weeks leading into Christmas and New Year’s Eve.
For BWS, Hrdlicka emphasized the brand’s convenience footprint of more than 1,450 stores and noted record value-for-money and e-commerce voice-of-customer scores. She said BWS delivered its highest-ever e-commerce sales month in December and is increasing activity in Everyday Rewards offers and value promotions. The BWS app reached 850,000 monthly active users, with more than half coming from Millennial and Gen Z customers.
Beattie said online sales for Dan Murphy’s and BWS grew 35.1% to 11.3% of combined sales, describing online as a highlight. During Q&A, Hrdlicka said most of the online growth came through click-and-collect, which leverages store fixed costs even though it does not flow through same-store sales growth calculations.
Retail profitability was pressured by price and promotional investment. Beattie said retail gross profit margin declined 84 basis points to 23.9% due to price leadership efforts and elevated promotional activity across the market. Underlying cost of doing business was flat year-on-year at 18% of sales, with inflation headwinds (including a 4% award wage increase) offset by savings from the endeavourGO optimization program, restructuring benefits, and lower One Endeavour technology program costs. Retail underlying EBIT fell 11.6% to AUD 327 million.
Addressing questions on margins and the outlook, Hrdlicka said the company would “continue to compete,” and reiterated a commitment that “Dan Murphy’s will not be beaten on price by anyone at any point for any reason.” She added that management believes it is early days and that the company has more to do, including marketing that has not yet fully reflected the “changed posture” of Dan Murphy’s and BWS.
Hotels: renewals and gaming investment support growth
The hotels segment delivered sales growth of 4.4% to AUD 1.2 billion, with comparable hotel sales up 4.2%. Hrdlicka said performance was strong around key social occasions and events, and Beattie said growth was supported across food and bar, gaming, and accommodation.
Gaming delivered mid-single-digit sales growth, supported by investment in gaming room refurbishments and upgraded electronic gaming machines (EGMs), with more than 800 new cabinets installed in the half. Hrdlicka said Endeavour continues to gain gaming market share in Victoria, and management said performance improvements were also evident in Queensland, driven by venue and machine investments.
Food and bar sales benefited from menu optimization and record trading during major event periods, while accommodation captured peak demand during key events. Hrdlicka said the pub+ loyalty program has more than 600,000 active users and accounted for 29% of food and beverage transactions, while voice-of-customer score reached 9.1 out of 10.
Beattie said hotels gross profit margin expanded 12 basis points to 85% due to favorable sales mix, better buying initiatives, and optimized menus. Hotels underlying cost of doing business grew 4.4% due to wage increases, guest experience investment, higher repairs and maintenance, and higher depreciation and amortization following accelerated investment. Underlying EBIT increased 5% to AUD 275 million, with EBIT margin up 13 basis points to 23.5%.
Endeavour completed 21 hotel renewals in the half. Hrdlicka said renewed venues in the FY2024 cohort are collectively delivering over 20% ROI in year two post-renewal, ahead of a 15% target. In Q&A, Beattie said venues that have not been updated for some time can carry higher repairs and maintenance costs, supporting the case for accelerating renewals. Management also described a mixed pipeline approach, ranging from “light touch” improvements to larger whole-of-venue repositionings.
Cash flow, balance sheet, and investment programs
Endeavour generated AUD 997 million of net operating cash flows, with Beattie reporting a cash realization ratio of 165%. Free cash flow was lower year-over-year due to accelerated investments, including new retail stores, hotel renewals, and EGM upgrades.
Net debt decreased by AUD 34 million versus the prior comparative period, supported by reduced trade working capital and asset sale proceeds. The underlying leverage ratio was 3.3 times, though Beattie noted cash flows are seasonally weighted to the first half and net debt is expected to be higher at year-end. The company had AUD 1 billion in undrawn debt facilities at the balance date, and full-year FY2026 finance costs are expected to be broadly in line with FY2025.
Gross CapEx increased by AUD 71 million in the half. Beattie said Endeavour opened five new Dan Murphy’s and 17 new BWS stores, and completed 21 hotel renewals. For FY2026, the company revised total CapEx guidance upward to AUD 460 million–AUD 500 million, reflecting accelerated investment in hotel renewals.
On technology separation, Hrdlicka said the One Endeavour program’s standalone ERP build is on track, with planned FY2026 opex at the lower end of prior guidance and capex expected below the previous range. In Q&A, management said the lower spend reflects reduced expected cost rather than delays.
Hrdlicka also discussed a property development pipeline of five priority redevelopment sites, noting development applications have been approved for Forest Hotel and Chelsea Heights, with additional applications lodged for the Morrison Hotel and Camberwell sites and plans to lodge Doncaster Shopping Town by the end of FY2026. She said the five sites have been independently valued between AUD 100 million and AUD 150 million, with potential upside after approvals.
Outlook and strategy reset
Management said retail market conditions remain competitive and consumer softness is still evident. Hrdlicka said sales growth in both retail and hotels moderated in February compared to January, while noting retail comparisons were affected by prior-year supply chain disruptions early in the comparative period. She cited uncertainty in consumer spending amid elevated inflation, a war in the Middle East, and rising interest rates, but said the group’s scale and value proposition position it to compete in a value-focused environment.
Hrdlicka said the company will provide a fuller strategic update on May 27 at the Forest Hotel in Sydney. She said Endeavour’s work to date concluded the business had previously been too focused on margin and lost focus on customer value, which management is now addressing. She also said the company sees untapped potential to reduce costs and grow revenue across the portfolio, and argued the combined retail and hotels structure makes sense given cross-business potential.
About Endeavour Group (ASX:EDV)
Endeavour Group Limited engages in the retail drinks and hospitality businesses in Australia. It operates through Retail, Hotels, and Other segments. The company manufactures and sells drinks; and provides hotels-related goods and services, including food and drinks, accommodation, entertainment, and?gaming. It operates stores under the Dan Murphy's and BWS brands, and hotels. Endeavour Group Limited was incorporated in 2012 and is based in Surry Hills, Australia.
