Venue Renewals And Digital Platforms Will Capture Urban Demand

Key Takeaways

• Accelerated venue renewal, digital innovation, and cost optimization efforts have significant overlooked potential to drive sales, margin expansion, and overall group revenue growth.
  
• Scale, data-driven loyalty programs, and retail media monetization position Endeavour Group to outperform peers through enhanced customer engagement, retention, and incremental high-margin earnings streams.
  
• Shifting consumer attitudes, increased regulation, and rising competition threaten Endeavour Group's core alcohol and hospitality businesses, undermining revenue growth, profit margins, and market share.

Catalysts

Engages in the retail drinks and hospitality businesses in Australia.

• Analyst consensus sees hotel and retail network renewal programs as key to future growth, but this view likely understates the potential uplift: recent venue refurbishments have driven up to 70% food & beverage sales growth at flagship sites, indicating that broader, accelerated renewal could deliver well above 10% sales uplifts and materially boost group revenue and return on capital well beyond consensus expectations.
  
• Analysts broadly believe that the cost optimization programme (endeavourGO) will yield solid margin expansion, but with the continued rollout of automation, AI-led rostering, and further leverage of enterprise systems, there is substantial unrecognized upside-management explicitly flagged the target as a floor with significant room for outsized cost savings that could drive net margin improvement faster than the market currently prices in.
  
• The company's scale, data-rich loyalty ecosystems (such as My Dan's and Pub+), and digital platforms uniquely position Endeavour Group to capitalize on the long-term shift towards personalized, experiential consumption, allowing deeper customer engagement and targeted promotions that should sustainably accelerate earnings growth and customer retention.
  
• Australia's ongoing urbanization and population growth are set to provide consistent, long-duration volume growth across Endeavour's hospitality and retail assets, translating into a long-term uplift in top-line revenue at a rate meaningfully above mature market averages for comparable global peers.
  
• The company is in the early stages of retail media monetization-leveraging its dominant omnichannel brands and vast customer base, Endeavour Group has the potential to build a high-margin digital advertising and data monetization business that could deliver incremental earnings growth with virtually no additional capital requirements.

Endeavour Group Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Endeavour Group compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Endeavour Group's revenue will grow by 3.7% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 3.5% today to 4.4% in 3 years time.
• The bullish analysts expect earnings to reach A$588.5 million (and earnings per share of A$0.33) by about August 2028, up from A$426.0 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 21.5x on those 2028 earnings, up from 16.6x today. This future PE is lower than the current PE for the AU Consumer Retailing industry at 25.1x.
• Analysts expect the number of shares outstanding to grow by 0.36% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.54%, as per the Simply Wall St company report.

Endeavour Group Future Earnings Per Share Growth

Risks

• Increasing health consciousness and growing anti-alcohol sentiment may structurally reduce demand for alcohol in Australia over time, potentially resulting in a sustained decline in revenue for Endeavour Group's core liquor retail and hospitality businesses.
  
• Relatively weak sales performance in its core retail liquor segment, with revenues declining by 1.2% year-on-year and management characterizing the retail market as subdued outside of key events, indicates ongoing risk to earnings and net margins if this trend persists or worsens.
  
• Escalating competition, including aggressive pricing and promotions across both traditional and online channels, alongside convenience-oriented formats, may squeeze Endeavour's margins and threaten market share, putting long-term pressure on profits and earnings growth.
  
• Regulatory risks, including tighter government controls, higher alcohol excise, and potential expansion of gambling regulations, are likely to drive operating costs higher and compress net margins, especially given Endeavour's high exposure to such regulated industries in Australia.
  
• Demographic trends, such as lower alcohol consumption among younger generations and an aging population, could structurally contract the total addressable market for Endeavour's brands over the next decade, limiting both revenue growth and long-term profitability.

Valuation

• The assumed bullish price target for Endeavour Group is A$5.62, which represents two standard deviations above the consensus price target of A$4.43. This valuation is based on what can be assumed as the expectations of Endeavour Group's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of A$6.1, and the most bearish reporting a price target of just A$3.6.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be A$13.5 billion, earnings will come to A$588.5 million, and it would be trading on a PE ratio of 21.5x, assuming you use a discount rate of 7.5%.
  
• Given the current share price of A$3.95, the bullish analyst price target of A$5.62 is 29.7% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.