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.

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.

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.