Endeavour’s strategy unveil focused very much on retail fundamentals and lacked quantifiable detail.  The emphasis on sales growth is sensible given Endeavour Retail has lost 5% of market share over five years. There is upside in selling data to suppliers and better buying margins too. The $300 million cost savings will be partly offset by cost inflation. Management incentives attached to the strategy will be crucial. Previous iterations focus on sales, EBIT and working capital, along with ROFE and EPS. We expect the same focus going forward. We forecast capex to hover near $500 million as more is spent on hotels, which is consistent with a lower dividend payout ratio.

Endeavour Group will hold a strategy day on 27 May 2026. While a good opportunity to hear about its focus and meet new management, we expect the strategic pillars to be about improving its price position in Dan Murphy’s and cutting costs, both largely known topics. We wonder about the future of Pinnacle Drinks and see upside from a shift in range towards RTDs. Hotels refurbishments will be a feature with a higher frequency needed. We think the strategy day is unlikely to reveal much new, and puts the focus on a) liquor industry demand growth and b) the execution of its strategy.

Endeavour Group’s 3Q26 trading update revealed slower sales trends with an enticement of $100 million in cost savings in FY27e as a benefit. The reality is that sales trends are insufficient for cost savings to drop through to earnings. We expect Endeavour to continue gaining market share given First Choice could close, but a recovery in market growth is more important in our view, which may take time as retail liquor reverts to slight per capita volume declines.

Endeavour Group’s 1H26 result release revealed ongoing weakness in Retail liquor sales and further gross margin pressure for 2H26e. Gross margin investment that commenced in September 2025 needs to flow through and should start to boost sales late in FY26e as marketing is ramped up. However, EBIT recovery will only begin in FY27e. The Hotel segment is seeing good momentum from site renewals and more will be done over the next year. However, it is grappling with higher cost growth.

Endeavour Group provided a trading update that revealed gross margin pressure on its Retail segment earnings for 1H26. The release also provided the first indications about new CEO Jayne Hrdlicka’s likely strategic direction. Ms Hrdlicka will clearly focus on price leadership and driving more sales through its stores. There is also scope to cut overheads and unwind the arrangements with Woolworths over time. We have lowered our EPS by 5% in FY26e and 1% in FY27e. We retain a Buy rating on Endeavour and expect the shares to re-rate once there is clarity from the refreshed strategy in May or June 2026.

We have produced a chart pack about the outlook for the liquor industry. The primary debate is the structural vs cyclical components impacting the decline in consumption. While we see structural decline, we expect it to be in the order of -0.5% per capita, per annum, far lower than the circa -6% p.a in the past two years.  We are seeing signs of improving volumes in on-premise (pubs and restaurants).

Recent Australian data on liquor demand fuels the debate about the structural and cyclical factors. Per capita liquor consumption fell 6% between FY23 and FY24 and we see another -6% for FY25. This sounds sobering. However, the industry is still coming down from its COVID-19 binge and sustaining the long-term structural decline seen over the past 20 years. The silver lining is the magnitude of the decline in liquor markets is likely to ease. Beer volumes have turned positive on-premise. We expect retail liquor to return to growth in the December 2025 quarter. The real opportunity in the liquor industry is to tap into the trend towards premiumisation and RTDs, where Endeavour and Coles both under-index.

Endeavour Group reported 1Q26 sales down 0.3%.  The sales dynamic remains broadly consistent with declines in Retail liquor volumes, but growth in Hotel sales. Endeavour’s commentary suggests gross margin risks are building as it invests in sharper pricing in order to improve sales trends in its retail stores. We expect EBIT to drop by 5% in Retail in FY26e, despite cost savings. The Hotel business should have a better financial year given sales growth, but costs are elevated.

Upcoming quarterly sales for Coles, Woolworths and Endeavour Group will show a continuation of recent themes. Coles Supermarkets winning, receding inflation and weak liquor volumes. We forecast 1Q26e comp sales of 4.2% for Coles and 1.6% for Woolworths. This gap is approaching a level where Coles could also win 2Q26e, an outcome that would intensify the scrutiny on Woolworths Board and management. We forecast Coles Liquor comps at -0.3% and Woolworths at -0.6%. Liquor retail is still in the doldrums, but pubs are back in growth suggesting broader liquor consumption concerns are easing.

Endeavour Group reported a weak FY25 result with EBIT down 12%. There were mixed fortunes with Retail earnings down and Hotels up.  Recent sales trends suggest a similar dynamic in FY26e. However, we see more cost savings and less headwinds from its One Endeavour restructuring costs. We make EPS downgrades of 5% in both FY26e and FY27e given lower Retail sales and some gross margin pressure. Endeavour’s balance sheet has high gearing. When combined with its management changeover in January 2026, the risks are growing that an equity raising is used to improve its balance sheet and provide the capital to turnaround the business.