Endeavour Group: Australia’s King of Australian Alcohol Retail on Sale?

Creating a More Sociable Future, Together

“Stalwarts are stocks to own for moderate growth and relative safety. The best time to buy them is when they're out of favor.”

• Peter Lynch

Executive Summary

Endeavour Group is a classic stalwart: a mature, market-leading business with strong cash generation and defensive characteristics. It operates Australia’s largest alcohol retail and hospitality network, including BWS, Dan Murphy’s, and over 350 hotels. Its competitive advantages stem from national scale, supply chain efficiency, exclusive private label brands, customer data insights, and regulatory barriers—particularly in electronic gaming machines.

While recent results have been weighed down by industrial action, soft consumer spending, and leadership transition, the long-term fundamentals remain intact. Endeavour continues to gain market share, improve operational efficiency, invest in digitalisation, and premiumisation trends. The current valuation reflects pessimism, trading at a meaningful discount to its consumer staple peers.

With a stable 5%+ dividend yield, modest long-term growth potential, and room for multiple re-rating, Endeavour offers a compelling mix of income, resilience, and value. For investors seeking a durable, out-of-favor stalwart with a margin of safety, Endeavour Group deserves a closer look.

What Does Endeavour Do?

Endeavour Group runs Australia’s largest network of alcohol retailers under the brands of Dan Murphy’s and BWS. The alcohol retail business accounts for more than 40% of Australian retail alcohol sales with 1,453 BWS stores and 275 Dan Murphy’s stores. It sells alcohol in stores, online and even drive through, generating 10.2bn in total revenue for the group as well as 685m in EBIT.

* Liquor store drive through in North Curl Curl

Endeavour Group also runs Australia’s largest network of hospitality venues. It has 354 hotels and pubs across Australia providing a range of services including: alcohol, food, electronic gaming, wagering, live entertainment and accommodation. The hospitality part of Endeavour Group generates 2.1 billion in sales and 438m EBIT.

Finally Pinnacle Drinks develops, sources, imports and distributes alcoholic beverages for Endeavours retail and hospitality operations. Pinnacle allows Endeavour to innovate and offer private label products which can enhance its margins and offer its customers exclusive products they can’t get elsewhere.

Does Endeavour Group have a competitive advantage/moat?

Scale

Endeavour Group’s primary competitive advantage lies in its unmatched scale within Australia’s liquor distribution industry. Operating over 1,720 liquor stores under well-known brands such as BWS and Dan Murphy’s, Endeavour has at its disposal a comprehensive nationwide distribution network. This extensive footprint enables the company to optimize its supply chain with low marginal costs and execute synchronized national marketing campaigns.

To efficiently move products from many suppliers to its many retail stores and hospitality outlets, Endeavour has a highly cost-effective supply chain infrastructure, some of which it shares with its former parent Woolworths. This supply chain incorporates significant fixed costs—such as software systems for inventory management, dedicated personnel overseeing supplier relationships, and logistics and distribution infrastructure. By spreading these fixed costs across a vast volume of goods, Endeavour significantly lowers the marginal cost per unit transported. Multiple distribution centers strategically located around Australia also facilitate same-day delivery to stores, hotels, and customers. This capability reduces inventory holding costs and enhances customer satisfaction. Competitors lacking Endeavour’s scale and operational expertise face challenges replicating such an efficient, low-cost distribution system.

Endeavour’s scale also provides substantial operational leverage. The company can invest in larger, more impactful advertising campaigns for its brands. Given its extensive store network and high sales volumes, the marginal cost of these marketing efforts is lower compared to a similar campaign from smaller competitors. Furthermore, Endeavour’s volume of shelf space across Australia strengthens its negotiating position with suppliers, enabling bulk purchasing discounts and additional promotional support.

Finally, Endeavour’s scale empowers it to invest heavily in innovation. Whether improving logistics, experimenting with new store formats, or introducing new beverage types, Endeavour can pilot innovations in select stores. Successful initiatives can then be rolled out across its entire network, achieving greater impact at a lower relative cost than competitors could manage.

Margins tend to be low for retailer types such as Endeavour which sell a large number of low margin goods such as liquor stores or supermarkets. But even so Endeavour's margins outshine those of its key competitors as can be seen below.

Data Driven Customer Insights

Endeavour Group’s national scale doesn’t just streamline logistics—it fuels a significant advantage in customer intelligence. With thousands of daily transactions across its Dan Murphy’s, BWS, and hotel venues, Endeavour gathers one of the largest sets of retail liquor data in Australia. This vast dataset enables the use of better data analytics—capabilities that are often out of reach for smaller, less data-rich competitors. This better data drives insight, and insight enhances the customer experience.

The vast number of transactions processed by Endeavour offers valuable data insights into customer behaviour, including purchasing patterns, seasonal trends, and preferred product combinations. This data enables Endeavour to make smarter decisions around inventory management, store layout optimisation, and demand forecasting. By anticipating customer needs more accurately, Endeavour can stock the right products at the right time, reduce waste, and improve product availability—creating a seamless and more satisfying customer experience while also enhancing operational efficiency.

Endeavour deepens its customer relationships through digital platforms such as My Dan’s, the BWS app, and Pub+. These loyalty programs don’t just reward frequent shoppers—they provide Endeavour with high-quality, individual-level customer data. With more than 5.4 million members in the My Dan’s program alone, Endeavour can personalise its interactions by delivering tailored promotions, hyper-targeted advertising, and smart product recommendations. This level of customisation increases conversion rates, strengthens brand loyalty, and creates a more engaging shopping experience that’s difficult for competitors to replicate.

Coles in its annual report reports sales per square meter of $15,860 in its liquor division Liquorland. Endeavours doesn’t report its sales per square meter, but based on the total area of its stores and total sales analysts estimate sales per square meter over $20,000.

Private Label Products

Another part of Endeavour's economic moat is its extensive portfolio of private label and exclusive brands, developed and managed through Pinnacle Drinks, its subsidiary. Its wines, craft beers and ready to drink offerings are sold exclusively through Dan Murphy’s and BWS differentiating Endeavour from competitors and enhancing customer loyalty. By offering private label brands Endeavour also controls product development and sourcing allowing it to capture a higher margin than it would from selling third party brands. By leveraging customer insights from its retail operations Endeavour can develop trend following offerings ensuring its private label portfolio remains desirable reinforcing its brand ecosystem and pricing power.

Electronic Gaming Machines (The Pokies)

Endeavours moats are not just limited to sale and distribution of alcohol, but also include electronic gaming machines. Electronic gaming machines or as they are commonly referred to in Australia as “pokies” can be found outside of dedicated gaming venues such as casinos and inside venues such as pubs and hotels. Endeavour is one of Australia’s largest non-casino operators of these pokies operating approximately 12,000 across its hundreds of venues.

Owning such a large number of pokies gives Endeavour scale advantages when it comes to operating pokies due to the number it operates. This can include:

• Access to premium gaming machine suppliers

• Preferred service and maintenance arrangements

• Ability to optimise machine mix and placement across it’s network of hotels and pubs

This results in a highly efficient, high margin revenue stream for Endeavours hotels, which requires relatively low working capital. Although Endeavour doesn’t break out its revenues from pokies, Endeavour hotels are significantly more profitable than other hotels without pokies.

Another way in which Endeavour has a moat when it comes to pokies is through regulation. Australian gambling and pokies are mostly regulated on a state by state basis and one part of this regulation places caps on the number of pokies. These caps are generally on a statewide basis, but can also be per venue or per region. Many local councils also impose strict regulations placing caps on the number of pokies. These regulations effectively lock in market share for incumbents like Endeavour, making it illegal for new entrants. With Australia’s population growing these regulations also make each machine more valuable as Australia's population grows there are more potential customers with access to the same number of machines. That said, regulations can also harm operators of pokies and create uncertainty with many states floating ideas that may harm pokies revenue, I will go into this later in this post.

Moats do not require growth they require durability and Endeavour's position in pokies is protected by regulatory restrictions, complexity and scale. Even if regulations tighten larger operators like Endeavour would have an easier time adapting as part of the cost of compliance can be spread over more venues and a larger operator can more loudly contribute to government discussions on the shape of such regulations. The hospitality industry is also a significant employer across Australia and generally supports pokies and pokies taxation is a significant source of income for state governments.

Endeavours Earnings and Historical Overview

Endeavour doesn’t have a long history as a public company. It has only been a public company since it was spun off from Woolworth's in 2021, Woolworth’s continued selling its stake until September 2024.

Endeavour has published financials going back to 2018. In general they are operating in a mature market and so their historic growth rate is steady with an occasional problem such as Covid in 2020.

Bruce Mathesion is an Australian billionaire pub baron, he negotiated a joint venture merging his pubs and hotels with Woolworth’s liquor business in 2000. He is now one of the largest shareholders of Endeavour owning 15% of shares. In 2023 Bruce expressed dissatisfaction with the leadership of Endeavour especially Chairman Peter Hearl and Chief Executive Officer (CEO) Steve Donohue criticising their retailing strategy at Dan Murphy’s, the purchase of wine companies and wine specialty businesses and Voluntarily implementing Victoria’s gaming reforms 10 months early.

“I don’t think anyone in this country would stand by the performance of this group under the leadership of Peter Hearl and Steve Donohue. It has been an absolute disaster and their decisions have been disgraceful”

• Bruce Mathieson

Peter Hearl defended the company’s strategy and board emphasising revenue growth and market leadership. He refuted Mathiesons claims, maintaining the criticisms were based on selective information and the board acted in the best interests of shareholders. The dispute was settled with a board reshuffle with chair Peter Hearl and Bruce's son Bruce Mathieson Jr. both stepping down from the board and new directors appointed.

Over the past 18 months spending on alcohol in Australia and general discretionary spending in Australia slowed down. The first six months of 2024 left same store sales at Endeavour flat, which wasn’t a good result but put it ahead of Coles Liquorland which had declining sales. This was followed by falling profits, but increased revenues in the second half of 2024. The general slowdown in alcohol sales wasn't just experienced in Australia; other liquor companies across the world have also experienced a recent drop. Sales for many alcohol brands globally went up in 2023 with the general ending of most Covid restrictions and then went down to more normal levels in 2024. Results were relatively flat in the later half of 2024 until 17 day strikes at some of Woolworths distribution centers starting in November. This led to shortages of goods in stores, late deliveries and higher costs further impacting profits. It was further compounded due to the proximity of these events to Christmas, the peak time of year.

In September 2024 CEO Steve Donohue announced he would be stepping down as CEO of Endeavour Group after six years in the role, first under Woolworths and then as an independent company. It was announced earlier this year that at the beginning of 2026 Jayne Hrdlicka will take over as CEO. In the Interim Ari Mervis will be leading the company as Executive Chairman.

Since Endeavour listed in 2021, splitting off from Woolworth’s it hasn’t had the smoothest time, especially over the past two years. Over this time it has mostly managed to increase market share, (excluding the last half of 2024 with the strikes) becoming even more dominant in the Australian market. However, especially over the past two years its stock price has fallen from a listing price of $6.1 and from a peak of $8 in 2022 to a current price around $4.

Liquor Retailing Industry in Australia

Trends

Alcohol consumption in Australia has largely followed trends in other high income countries with the total volume of alcohol consumed per capita declining since the 1970’s. However while the total volume of alcohol consumed has gone down the total spending has remained more stable as a percentage of incomes with consumers drinking alcohol in more premium forms. This can be seen below with a fall since the 1970’s in consumption of beer, while consumption of wine and spirits increases. Overall consumption of alcohol per capita has been mostly flat on a per capita basis since the early 90’s, but with beer continuing to fall.

Online Sales

In Australia over the last decade and especially in recent years with Covid19 online sales of alcohol have increased at a rapid pace. Online sales here are defined as both deliveries and click and collect (order online & pick up packed at store). Based on data analysed by Frontier Economics provided by Retail Drinks Australia for the financial year 2021-22 total Alcohol spending in Australia for the year was $16.3 billion and of this online sales accounted for $2.1 billion or about 13%. It is estimated this will grow by 25% between financial year 2022 and financial year 2028.

Online alcohol sales has been dominated by two groups:

1. Alcohol retailers especially bricks and mortar retailers who have dominated online alcohol sales in Australia.

2. Third party marketplaces such as Uber and Doordash have also popularised online purchases delivering alcohol from retailers to customers.

Endeavour Group and Coles LiquorLand are the two largest participants accounting for 63% of online alcohol sales. The “Other Retailers” includes a range of brands such as: Metcash, Naked Wines, Uber, Vinomofo, Boozebud and Liquor legends.

Regulation

Each Australian state has its own licensing authority and specific set of rules for alcohol retailing in their state. These laws and regulations are designed to reduce alcohol related harm and promote responsible consumption. Some common elements across states include: restricted trading hours, mandatory staff training in Responsible Service of Alcohol (RSA) and limits on where alcohol can be sold. Retailers must obtain licenses that take into account proximity to sensitive areas such as schools, community impact and outlet density. In recent years regulation has sought to target online sales introducing checks around: age verification, restricted delivery hours and intoxication checks. There are also restrictions on alcohol advertising, particularly advertising that might appeal to minors or encourage excessive consumption.

Long Term and Medium Term Changing Consumer behaviour

As well as the significant impact online sales have had on alcohol consumption patterns there are a number of other factors that influence consumer buying behaviour in both the medium term and longer term.

In recent years in Australia there has been a cost of living squeeze, due to elevated levels of inflation. This has seen consumers become more cautious with their spending on products like alcohol. One way consumers are saving money is by buying cheaper brands or private label brands, this wouldn’t be good for Endeavour's market share with their own private label brands that have higher margins and retailing alcohol at multiple price points. In addition, consumers may also look for special deals and promotions, which once again benefit Endeavour's market share, which through its apps and other programs can more easily target consumers with exclusive personalised deals. Finally consumers have also bought and spent less overall on alcohol products, a negative for the whole industry. This has led to lower revenues and profits for alcohol retailers, but during this period of time Endeavour has expanded market share over weaker suppliers reinforcing its moat.

There has been a long term trend for consumers to drink less but better. As discussed at the beginning of this section since the 1970’s the volume of alcohol consumption has been trending down on a per capita basis. This hasn’t been as bad for the industry as a whole due to consumers consuming more premium types and brands of alcohol and leaving spending relatively constant as a percentage of income. As seen in the graph above there has been higher consumption of wine and spirits and despite the fall in beer consumption rise in more premium beers such as craft beers. This is likely driven by multiple cultural factors such as wellness trends in younger generations or the increase in female drinkers. Offering curated selections, exclusive labels and storytelling around provenance or craftsmanship helps tap into this demand.

Electronic Gaming Machines (pokies) in Australia

Australia has one of the largest electronic gaming machine (EGM) markets in the world. New South Wales—the country’s most populous and economically significant state—hosts over 90,000 machines, second only to Nevada in the United States, which has approximately 120,000. Although Australia accounts for just 1% of the global population, it is home to around 18% of the world’s EGMs. Unlike many countries where EGMs are confined to casinos and dedicated gambling venues, in Australia they are also commonly found in pubs and hotels. The country is also the headquarters of Aristocrat Gaming, the world’s largest manufacturer of EGMs. According to the Queensland Government Statistician’s Office, Australians wagered approximately $150 billion on pokies during the 2021–22 financial year, losing over $12 billion—a figure that represents nearly half of the nation’s total gambling losses.

Regulation

EGM are subject to strict regulations in Australia from laws primarily made and enforced by state governments. Each jurisdiction on a state or even local basis controls the number of machines allowed, licensing requirements for venues, harm minimisation measures and operating hours. For example, there are caps on total number of machines, limits on maximum bet and spin speed and requirements for responsible gaming officers. In recent years states such as New South Wales have introduced and trialled measures such as cashless gaming cards and real time player tracking to address problem gambling and potential money laundering. Growing public concern over pokies has led to a general trend for greater oversight of EGMs.

In July 2023 Endeavour Group announced plans to introduce Victorian government EGM regulations ahead of their mandatory schedule. These regulations were introduced 10 months early, demonstrating a commitment to responsible gambling. They are seen as Australia’s strictest EGM regulations including $100 limits on the maximum a player can bet at any one time, Carded play with mandatory pre commitments and mandatory closure periods.

What are Endeavour Groups Future Prospects?

Digital and Omnichannel Expansion

Endeavour Group is investing heavily in its digital capabilities to meet the ever evolving desires of its customers and future proof its business. EndeavourX is its digital division enhancing online experiences and managing data across its e-commerce platforms and mobile apps.

Online ordering and click and collect has become a central and rapidly growing segment across much of Australian retail. Due to its existing advantages across its retail store network Endeavour is the current leader in Australian online alcohol retailing. The group achieved over $1 billion in online sales, capturing a 37.4% market share in FY2021–22.

Through data collected from its loyalty programs, mobile apps and even stores, Endeavour uses data analytics to deliver more personalised marketing, curated product recommendations, and seamless customer experiences. This data-driven approach not only boosts customer engagement and retention but also improves operational efficiency and drives higher average spend per transaction.

Premiumisation and Private Label

One key trend shaping the Australian alcohol market is a premiumisation, which has become a pillar of Endeavour’s growth strategy. Australian consumers are drinking more but better with less beer consumption but more wines and spirits and even more premium craft beer. Endeavour has expanded its premium offering in its stores and hotels, catering to customers seeking both value and premium drinking experiences.

A central component of this strategy is the group's growing portfolio of exclusive and private label brands managed through its business Pinnacle Drinks. These labels not only offer Endeavour better margins, but greater control over product development and supply and are enhanced by Endeavour's significant data analytics capabilities. Endeavour can quickly respond to emerging consumer trends such as low alcohol, sustainable or organic products without relying on suppliers.

The dual focus on premiumisation and private label strengthens Endeavour's competitive profitability as these products generally have higher margins. It also strengthens Endeavour's moat by giving customers access to unique products they won’t find at competitors.

Operational and Technological Efficiency

“The Group’s optimisation program, endeavourGO, delivered $100 million in benefits in F24, materially offsetting the impacts of cost inflation and taking total cumulative program benefits to $190 million.”

• Annual report 2024

As well as trying various ways to increase sales Endeavour is continuously trying to reduce costs and simplify its business. Their current program around this is known as EndeavourGO, a multi-year cost optimisation initiative to enhance efficiency across its retail and hospitality divisions. The initiative has already managed to achieve $190 million in cost savings since launch through initiatives such as workforce planning, supply chain optimisation and better stock management. Endeavour has a target to achieve over $290 million in savings by the end of 2026. The program underscores Endeavour continuous commitment to improvement and operational excellence.

Alongside EndeavourGO, the company is progressing its technological transformation with the program One Endeavour. The One Endeavour program aims to separate it from Woolworths legacy systems and construct its own independent IT infrastructure. This would allow simpler, faster decision-making, improved data accessibility, and more tailored systems that better support its liquor retail and hospitality operations.

Leader in Responsible Gaming

One of Endeavour's most profitable business segments is its pokies, which also come with significant regulatory and reputational risks. As public concern over the harms of pokies grows and government regulation becomes tighter Endeavour has a long term strategic opportunity to position itself as a best in class operator in responsible gaming. When it implemented Victoria’s tighter gaming laws early it lost some short term profits in the months that it was implementing the regulations before it had to, but potentially bought good will giving it stronger community trust and good will with regulators.

This strategy can do more than retain its licence to operate; it can also help it potentially expand market share. As regulatory scrutiny increases less compliant lower standard operators may come under greater pressure to leave the industry. Endeavour with scale, governance frameworks and greater community goodwill could become the preferred buyer, expanding its share in a tightly regulated but highly lucrative market.

Endeavours Balance Sheet

Endeavour has a very healthy balance sheet with just over $2 billion in long term debt. This is in contrast to Endeavour's most recent EBITDA of $1.3 billion and net profit of $512 million. This robust balance sheet has Enabled Endeavour to make it through all the unpredictable shocks since its spin off and whatever unexpected events will occur in its future.

Endeavours Management Team

Endeavour Groups management is currently in a state of transition with six year CEO Steve Donohue announcing his resignation in September 2024. Steve will be replaced by Jayne Hrdlicka who will commence in her role on the 1st of January 2026. In the meantime the company is being run by Ari Mervis, the Executive Chairman.

Based on numbers I could confirm the directors of Endeavour don't seem to hold many shares in the company.

Ari Mervis

Ari was appointed to Endeavours board of directors in March 2024. Prior to becoming executive chairman of Endeavour Group Ari has held a variety of senior roles in the brewing and food industries. He was executive chairman of Accolade Wines and managing director of Murray Goulburn. He spent 27 years at SABMiller holding a variety of roles. Ari holds 100,000 shares in Endeavour Group as at the 2024 annual report.

Steve Donohue

Although Steve is the outgoing CEO his influence over the past six years will likely continue to impact Endeavour Group. Steve began working at Dan Murphy’s in 1994 and was appointed managing director and CEO in 2018. Prior to 2018 he held a variety of roles across the Endeavour drinks business including buying, merchandising and marketing. Steve has 281,541 shares in Endeavour Group.

Jayne Hrdlicka

Jayne was appointed replacement to Steve as of the 1st of January 2026, she has some retailing and food industry experience. Jayne has held a variety of senior executive positions across Australia including at Qantas, CEO of A2 Milk, CEO of Virgin Australia Holdings as well as a director on the boards of Tennis Australia and Woolworths. I do not have information of Jayne holding any Endeavour shares.

Kate Beattie

Kate is the Chief Financial Officer (CFO) of Endeavour Group. She joined Endeavour in 2018 and was appointed CFO in February 2023. Prior to joining Endeavour she worked in a variety of finance roles across Oracle, Macquarie, CBA and Woolworths. I couldn’t find a consistent number on Kate's stock holdings in Endeavour Group.

Endeavours Valuation

Endeavour Group doesn't have any other similar alcohol retailing businesses in Australia, with the next largest competitor controlled by large supermarkets Coles LiquorLand and Metcash. Endeavour similarly to the two large supermarkets Coles and Woolworths is a large entrenched, mature consumer staples stock with a healthy and stable dividend. One advantage it has to the supermarkets is it has a higher market share of close to fifty percent of alcohol retail, while the two big supermarkets not only compete with each other but also with Aldi. However Endeavour does have some more negative ESG aspects with its pokies that may lower its valuation relative to its supermarket peers. In addition, the alcohol sector is a more cyclical consumer staple sector than the supermarkets, as has been seen in recent years.

In the above table I have taken some valuation metrics of Woolworths and Coles and calculated Endeavours discount to the minimum of these. This gives a discount of more than 30% across both metrics and a dividend 66% higher . I don’t think Endeavour should trade in line with the supermarkets, but think the current level of discount is too high, especially considering this is likely a trough earnings year with consumers cutting back on alcohol spending and industrial action around Christmas. A much more reasonable PE in my view would be 19-20 along with a dividend yield closer to 4%.

In my discounted cash flow analysis I ran a number of different scenarios. Most cases begin with Endeavour earnings remaining flat to dropping into 2025. This is followed by a worse case scenario of 3% growth from then on to a base case of 4%-5%. The fair value I get for Endeavour Group is $5.19, representing a current discount to fair value of 22%.

Potential returns: A Sum-of-the-Parts Perspective

Another way of looking at the medium term returns of Endeavour I’ve been working with lately is looking at three key areas of return from a stock:

1. Cash returns to shareholders (dividends and buybacks)

2. Growth in earnings per share (EPS)

3. Valuation re-rating (changes in the P/E multiple)

1. On the first metric of returns of cash to shareholders over the past twelve months Endeavour has paid 21.8 cents per share. Which at today's share price of 4.02 is 5.4%.

In addition to the above for Australian shareholders Endeavour also has a 30% franking rate. This means a part of the tax is already paid on the dividend and so the pre tax dividend is 24.6 cents per share. This would bring the yield to 6.12%

2. Earnings declined in FY24 due to several short-term pressures, including industrial action close to Christmas and broader weakness in consumer spending. While the company operates in a mature industry, there are still growth levers at play—such as Australian population growth, operational efficiencies, premiumisation trends, and continued digital expansion.

Taking a conservative stance, I estimate long-term EPS growth in the range of 3%–5% per annum, broadly in line with nominal GDP growth plus modest business-specific upside.

3. Endeavour currently trades at a P/E multiple of below 16x, which is below the level I would consider fair for a defensive, cash-generative consumer-facing business with leading market positions.

I believe a more appropriate long-term multiple is 19x earnings, assuming moderate growth, stable returns, and Endeavour’s strong market share in both liquor retail and gaming.

If the stock were to re-rate from 16x to 19x over a five-year period, this would add approximately 3.75% annualised return through valuation expansion alone.

Brining Components Together

• Adding the first two sources of returns up you get 9.3%-11.3%.

• Then if we assume the PE ratio moves over the next five years from its current 16 to 19 this adds 3.75% per year, bringing potential returns to 13.05%-15.05%.

• Finally for Australian citizens we add the 0.63% bringing potential five year returns to 13.68% to 15.68%.

While Endeavour may not offer explosive upside, the combination of a reliable dividend, modest growth, and potential valuation re-rating makes for a compelling case in today’s high-valuation market. For long-term investors seeking stable, income-generating stocks with multiple strong moats, Endeavour remains an attractive option.

What Are the Risks to Endeavour?

Transition and Transformation Risk

Endeavour Group is undergoing a complex multi-year separation from Woolworths, involving major changes to its systems, processes and operating environment. The transition involves many risks such as operational disruptions or rising costs.

Electronic Gaming Machines (Pokies)

Endeavour Group derives a significant amount of earnings from pokies which are also a source of regulatory, social and reputational risk. Increased regulatory scrutiny and shifting community expectations may lead to intensified regulatory scrutiny.

Leadership Transition

Endeavour Group is currently undergoing a senior leadership transition with changes to not only its CEO, but also changes on the board. Last year CEO Steve Donohue announced he will be stepping down and the company is being temporarily managed by Ari Mervis, who will be replaced by Jayne Hrdlicka at the beginning of 2026. This extended transition period, combined with recent board reshuffles, creates potential risks.

Changing Macroeconomic and Market Environment

Endeavour Group faces highly competitive retail and hospitality markets. Evolving customer preferences and shifting macroeconomic landscape impact consumer preferences and demand. If Endeavour fails to adapt it could face declining revenue

Regulatory Change and Compliance Risk

Endeavour Group operates in a complex regulatory environment, particularly in the areas of liquor and gaming. Increased regulatory scrutiny and evolving regulation must be taken seriously and adopted. Some of these new rules include cashless gaming or new alcohol delivery rules. Failure to abide by the regulations can lead to fines, licence restrictions or reputational damage.

Data Privacy and Cybersecurity Risk

Endeavour Groups operations rely heavily on the integrity, security and availability of its data. Any failure in data protection or breach of cyber security could result in business disruption, reputational damage or financial loss.

Team and Capability Risk

Endeavour Groups success relies on its ability to attract, develop and maintain high-quality talent. labour shortages, rising employment costs, or failures in hiring, employment or compliance (e.g. underpayment) could negatively impact performance, reputation or operations.

Safety, Health and Wellbeing Risk

Endeavour Group must ensure a safe and supportive environment for its team members, customers and partners. These risks can cause serious harm and lower employee engagement.

Product and Food Safety Risk

Endeavour must ensure the safety of products and food across Endeavours retail and hospitality stores is essential. Any lapse in food safety can cause serious health risks, financial losses, regulatory consequences and reputational damage.

Brand, Reputation and ESG Risk

Endeavour Groups brand strength and reputation are vital to its competitive position. Reputational risks can arise from business decisions, marketing practices and ESG expectations. Missteps can lead to loss of community trust, regulatory pressure, higher compliance costs and reduced profitability.

Business Resilience and Partner Risk

Endeavour Groups face risks from unexpected disruptions such as supply chain breakdowns, pandemic, weather or infrastructure failures. Operational continuity also relies on third parties including service agreements with Woolworths. Failure could significantly impact service delivery and operations.

Conclusions

Endeavour is a mature dominant player in a stable industry with multiple reinforcing moats - scale, data, private labels and regulatory barriers. It generates strong free cash flow, pays generous reliable dividends and operates with a solid balance sheet. While it is not a high growth stock, it doesn’t need to be to be a profitable investment.

Right now Endeavour faces short term headwinds - industrial action, soft consumer spending, and leadership transition. But these do not appear structural. The stock price of Endeavour has more than priced in these concerns, offering investors a stock trading a meaningful discount to peers and estimated future cash flows.

Endeavour is a stalwart of the Australian Alcohol retailing industry that is temporarily out of favor. For long term investors willing to look through the noise it presents a compelling opportunity.