Endeavour Faces $45m Cost Hit Amid Warehouse Closure and Margin Pressure

Modest Sales Growth Amid Competitive Pressures

Endeavour Group has released a preliminary update on its trading performance for the first half of the 2026 financial year, revealing a cautious but positive sales trajectory. Total retail sales edged up 0.3% to $5.5 billion, with Dan Murphy’s and BWS contributing a 0.7% increase. This growth was underpinned by a strategic focus on price leadership and promotional activity, particularly in the second quarter, which saw four consecutive months of sales gains and a record December month for Dan Murphy’s.

Despite this top-line improvement, the group faced margin pressure in its retail operations. Investments in lower shelf prices and value-focused promotions led to an expected decline of approximately 85 basis points in retail gross profit margin compared to the prior corresponding period. Retail EBIT before significant items is forecast between $323 million and $328 million, reflecting this trade-off between volume growth and margin compression.

Hotels Segment Drives Stronger Growth

The hotels division performed robustly, delivering a 4.4% increase in sales to $1.2 billion. This growth was fuelled by an uplift in gaming revenue, successful refurbishments, and positive trends in food and beverage transactions. December marked the strongest monthly sales ever for the hotels portfolio, with record-breaking weeks leading up to Christmas and New Year’s Eve. Hotels EBIT is expected to range between $271 million and $275 million before significant items, maintaining solid profitability.

Significant Items and Strategic Supply Chain Changes

The group anticipates recognising approximately $45 million in pre-tax significant expenses in the half-year results. The bulk of this relates to a provision for one-off cessation costs tied to the planned closure of the Melbourne Liquor Distribution Centre (MLDC) in 2028, following the end of a contract with Woolworths Group. Endeavour has secured a new 10-year contract with a global supply chain provider for a replacement Victorian Distribution Centre starting in October 2027, which is expected to deliver material long-term benefits despite the upfront costs.

Additional significant items include non-cash impairments on hotel properties, advisory fees, and a one-off gain from the sale of gaming entitlements. These factors contribute to an expected Group EBIT range of $555 million to $566 million and a Group profit before tax (PBT) between $400 million and $411 million, excluding significant items.

Looking Ahead, Strategy and Investor Engagement

Endeavour Group’s CEO Jayne Hrdlicka emphasised the importance of price leadership and customer value propositions in driving sales momentum, particularly in a competitive retail environment. The group plans to roll out initiatives aimed at enhancing in-store price execution, improving customer engagement both online and offline, and advancing cost reduction efforts. These initiatives are expected to take time to fully implement and yield benefits.

Investors can expect a more detailed breakdown of the half-year results in March 2026, alongside further insights into the refreshed strategy at a subsequent Investor Day. Meanwhile, the group remains focused on maintaining market-leading shelf prices and leveraging its strong brand portfolio to sustain growth.