Endeavour’s business is divided into two segments. Its retail segment, which includes the Dan Murphy’s and BWS liquor store chains, is Australia’s leading omnichannel liquor retailer. Meanwhile, Endeavour’s hotels segment provides hospitality services and gambling operations.

Endeavour’s revenue is highly skewed to the retail segment, which we forecast will contribute approximately 85% of revenue over the next decade, with the balance coming from the hotels segment.

The split is more evenly balanced at an EBT level due to the higher margins achieved in the hotels business, with approximately 65% of EBT derived through the retail business and 35% through the hotels business.

Liquor sales appear to have bottomed. Following two quarters of declining sales, Easter sales were flat on last year. Stock on shelves was replenished after strikes curtailed deliveries in December 2024, and customer loyalty scores are back to prestrike levels.

Profits under pressure but liquor sales set to improve

We anticipate liquor sales growth improving into fiscal 2026, as consumers benefit from lower mortgage rates. We also expect cost pressures to abate, with inflation rates stabilizing in the low-single digits and liquor EBIT margins reverting to historical levels of 5.7% by fiscal 2027.

Profit margins are under pressure while group sales growth is lagging operating cost inflation in fiscal 2025. We estimate adjusted earnings per share to decline by 12%, before recovering together with sales growth and operating margins from fiscal 2026.

Although consumers are hunting for deals when liquor shopping, Endeavour’s pubs are thriving. The smaller hotels segment’s sales increased 5% in the March 2025 quarter, with growth across all categories: gaming, food, drinks, and accommodation.

Australian liquor retailing and gaming are safe havens from US tariffs, and we anticipate recent softness in liquor sales to prove cyclical. We believe the market is discounting these aspects and shares are cheap. We maintain our AUD 6.10 fair value estimate for wide-moat Endeavour.

Our fair value estimate implies a P/E ratio of 22 times fiscal 2026 earnings of AUD 0.28 per share. We think this appropriately accounts for the group’s growth outlook—a five-year earnings per share compound annual growth rate of 4% — and the relative defensiveness of its earnings.

Scale advantage in liquor underpins Wide Moat

We estimate the total addressable market for Australian off-premises liquor retailing at close to AUD 20 billion, and estimate Endeavour’s retail segment controls about half of the market through its BWS and Dan Murphy’s brands which collectively have approximately 1,600 outlets throughout Australia.

This is significantly larger than Endeavour’s closest integrated retail competitor, Coles Group, which we estimate holds 17%, and wholesaler Metcash’s independent customers which collectively hold 26%.

Endeavour’s dominant scale allows it to fractionalize distribution, administration, and marketing costs in a way that smaller competitors cannot. Stemming from its domineering market position and significant scale advantages, we estimate Endeavour to have a material, maintainable operating margin advantage over all its competitors.

This competitive advantage manifests itself through average EBT margins which Endeavour have consistently held above 6% relative to Coles Group’s liquor EBT margins which have historically been below 4%, a gap of consistently greater than 160 basis points over the past five years.

Further, Endeavour has been able to grow liquor sales faster than Coles Group for the last five years and has greater store productivity with sales per square meter of approximately AUD 20,000 relative to Coles Group of around AUD 15,000, owing to Endeavour’s brand strength and capital efficient store network optimization.

Endeavour’s hotels business also benefits from intangible assets that support economic profit generation. The hotels segment holds more than 12,000 electronic gaming machine entitlements, as well as its liquor licences.

Gaming licences are capped at a state and territory level, ultimately limiting the number of hotels, pubs, and clubs which have the right to operate electronic gaming machines in conjunction with their hospitality services.

CEO appointment soothes uncertainty

The appointment of a CEO removes uncertainty around leadership. Endeavour’s new CEO, Jayne Hrdlicka, is due to start in January 2026. We don’t envisage material changes to Endeavour’s strategy or portfolio in the interim.

Until then, executive chairman, Ari Mervis, will stay at the helm. Hrdlicka previously served as a non-executive director on Woolworths’ board while Endeavour’s businesses were still part of the grocer’s group. Most recently, Hrdlicka was CEO of privately owned airline Virgin Australia.

Endeavour Group (EDV)

  • Fair Value Estimate: $6.10
  • Moat Rating: Wide Moat
  • Star Rating: ★★★★★

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Terms used in this article

Star Rating: Our one- to five-star ratings are guideposts to a broad audience and individuals must consider their own specific investment goals, risk tolerance, and several other factors. A five-star rating means our analysts think the current market price likely represents an excessively pessimistic outlook and that beyond fair risk-adjusted returns are likely over a long timeframe. A one-star rating means our analysts think the market is pricing in an excessively optimistic outlook, limiting upside potential and leaving the investor exposed to capital loss.

Fair Value: Morningstar’s Fair Value estimate results from a detailed projection of a company’s future cash flows, resulting from our analysts’ independent primary research. Price To Fair Value measures the current market price against estimated Fair Value. If a company’s stock trades at $100 and our analysts believe it is worth $200, the price to fair value ratio would be 0.5. A Price to Fair Value over 1 suggests the share is overvalued.

Moat Rating: An economic moat is a structural feature that allows a firm to sustain excess profits over a long period. Companies with a narrow moat are those we believe are more likely than not to sustain excess returns for at least a decade. For wide-moat companies, we have high confidence that excess returns will persist for 10 years and are likely to persist at least 20 years. To learn about finding different sources of moat, read this article by Mark LaMonica.