Endeavour Group (ASX:EDV) is seeing slowing momentum in gaming expenditure growth across Victoria and Queensland, while retail sales are expected to struggle to outpace inflation amid weakening consumer conditions, Jefferies said in a May 24 note.

In Victoria, electronic gaming machine (EGM) spending at hotels and clubs rose 4.2% year over year to about AU$267 million in April, up from 2.9% in March, showing resilient gaming activity despite broader economic pressures.

Queensland showed moderating growth, with EGM expenditure in hotels and clubs up 4.2% year-on-year to about AU$320 million in April, down from 6.4% in March, as hotel gaming rose 4% and club gaming 4.4%.

Jefferies noted that spending on EGM in clubs and hotels across Victoria and Queensland is still increasing, though at a tighter pace, making it unclear whether the slowdown reflects weaker consumer confidence and household spending or tougher comparisons after a strong growth period.

The firm remains "on the sidelines" regarding Endeavour Group despite acknowledging strong retail execution and operational improvements, as modest sales growth, rising costs, and softer consumer conditions continue to weigh on its outlook.

The investment firm has a hold rating on Endeavour Group with a price target of AU$3.50 per share.