Shares of SNDL fell 7.5% following Q1 earnings, as investors reacted negatively to declines in both the liquor and cannabis markets, worsening top-line contraction, and a drop in consolidated gross margins—particularly driven by weakness in cannabis operations. Persistent challenges in same-store sales and a year-over-year reduction in free cash flow added to concerns despite some margin gains in retail segments.

• Net revenue declined 4.4% year-over-year to $196 million, reflecting contraction in the liquor and cannabis businesses.
• Gross profit fell by $3.8 million (down 6.8% year-over-year), with consolidated gross margin declining 70 basis points, attributed solely to ongoing softness in cannabis operations.
• Both adjusted and unadjusted operating income remained negative, though operating losses narrowed compared to the prior year on improved OpEx control and lack of prior SunStream write-downs.
• Free cash flow deteriorated to negative $7.6 million, a $6.5 million year-over-year decline, primarily due to working capital challenges in cannabis and higher CapEx.
• Management points to improvement initiatives and newly added exclusive production contracts, but expects revenue growth to return only in the second half of 2026 as easier comps and these measures take effect.