Is Endeavour Groups Profit Miss a Sign of Bigger Trouble Ahead?

Source: Kapitales Research

Highlights:

• Endeavour Group Limited (ASX: EDV) shares fell 3.9% after the company forecast profit before tax of $400 million–$411 million, about 7.5% below market expectations.
• Heavy discounting at Dan Murphy’s and BWS lifted sales volumes but squeezed margins, hurting overall profitability.
• Investors grew cautious about near-term earnings, even as the hotel and hospitality segment showed relatively stronger performance.

Profit Forecast Falls Short Amid Heavy Discounting

Endeavour Group Limited (ASX: EDV), the Australian retail and hospitality giant that owns well-known liquor brands Dan Murphy’s and BWS, saw its shares tumble 3.9 per cent after the company issued a profit warning that disappointed investors. At the time of writing, the group forecast profit before tax of $400 million to $411 million, a figure that came in roughly 7.5 per cent below analysts’ expectations, as heavy discounting eroded margins and weighed on retail sales performance.

Discounting Strategy Boosts Sales but Squeezes Margins

Endeavour’s decision to slash prices and ramp up promotional activity at its liquor stores helped stimulate sales traffic over the key Christmas and New Year period, with Dan Murphy’s even posting record sales on some peak trading days. However, pricing pressure also pulled down gross profit margins, with industry analysts noting that deep discounting reduced earnings more than anticipated.

Retail liquor sales across the Dan Murphy’s and BWS networks rose only modestly, reflecting subdued consumer demand and intensified competition in the market. Meanwhile, consumers facing cost-of-living pressures have become more value-conscious, increasingly favouring lower prices that have cut into Endeavour’s profitability.

Hotel Segment Shows Growth, But Not Enough

While liquor retail remains the largest contributor to group sales, Endeavour’s hotel and hospitality operations reported healthier performance, with sales growth supported by stronger food, bar and gaming revenue streams. This healthier performance in pubs and hotels helped cushion the overall earnings shortfall, but it was not enough to offset the drag from the retail arm.

Investor Confidence Tested

The profit miss and resulting share price decline have stirred concern among investors about the company’s near-term earnings trajectory, even as management underscores its focus on long-term value creation through pricing strategy refinement and customer engagement initiatives. Analysts will be watching the next earnings update closely to see whether the company can stabilise margins and return to stronger profit growth

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