Metcash has releases HY results with sales revenue up 2.2% to AU$6.2bn and EBIT increasing 1.2% to AU$158.1m.
Food sales up 1.0% to AU$4.3bn
Supermarket sales were flat at AU$3.6bn, aided by easing price deflation duiring the half. Growth on the east coast and flat sales in South Australia were offset my declines in Western Australia. Wholesale sales declined -1.9%, although this marked an improvement on the same period last year, the majority of the decline was also attribuited to poor performance in Western Australia. Sales improved across the IGA network, although LFL sales continued to decline by -0.2% (-1.1% H1 last year). Convenience sales increased 5.4% to AU$762.9m, due to sales growth, both LFL and footprint expansion, from a large contract customer.
Continue progress against strategy
Metcash continued to advance against its strategic objectives. Approximately 350 stores have now been included in the Diamond Store program, with another 23 added in H1 and 73 in progress. With average stores sales up >10%, Metcash has simplified the program and plans to accelerate the roll out in FY20. Around 240 products are now available under the CommunityCo private lable brand, with 80 products added including fresh food lines. Metcash continues to improve retailer engagement with a new long-term supply agreement with Foodland in South Australia, an improved range and pricing stratgey, plus a new trading model for SA and WA retailers. As part of the agreement with Foodland it will develop a new 68,000 sq m food and liquor DC that will be completed in mid-2020. It has also introduced a new state-based operational structure to enable faster decision making.
Liquor sales up 6.7% to AU$1.8bn
Modest volume growth was offset by shopper preferences for more premium items. IBA bannered stores, as well as ALM wholesale customers both saw sales grow, with ALM benefiting from new large contract customers. Wholesale sales to IBA bannered stores saw LFL sales grow 2.0%, supported by the 'best store in town' initiative. Other inititaives implemented included; improvements to private label ranges with SKU's increased to 70 across beers, wine and spirits categories and sales growth of c.30%, improvements to the on-premise team, 38 IBA stores refreshed and 53 cool room upgrades, plus improvements to range with more premoium, regional products and range extensions.
Competitive environment will remain challenging
Metcash expects market conditions to remain tough for the rest of the year, but are encouraged by progress in the half. Group CEO, Jeff Adams, commented, "The first half results were pleasing in the face of challenging market conditions, with the Group delivering improved sales and earnings. Our Supermarkets Pillar continued to face challenging market conditions, however it was encouraging to see a slowdown in the rate of deflation which helped deliver an improvement in the sales trajectory for both ourselves and our retailer network."