Endeavour’s share price has dropped 10% in the past quarter. Our take is the share market is concerned about the outlook for liquor industry demand and the transition to a new CEO. We address the liquor industry outlook in this report and find that the weakness in sales is more a function of the COVID-19 spike in demand than a structural concern. We expect retail liquor sales to improve meaningfully by June 2025 and support better earnings for Endeavour. 

Endeavour Group reported a modest lift in 3Q23 sales with improved sales in Retail still lagging the rate of inflation and the Hotel segment sales recovery driven by lower margin food and beverage sales. Endeavour should report earnings growth in FY23e, but growth may step down in FY24e as soft sales trends, weaker gaming sales and higher wage costs places pressure on profit margins.

Endeavour Group reported 3Q22 Easter-adjusted sales decline of 0.7% in its Retail liquor business and 2.5% growth in Hotels. The sales trends improved later in the quarter as the economy reopened further after a spike in Omicron cases in January 2022. The company also noted some disruptions and costs associated with floods in northern NSW and QLD.