Metcash reports impressive H1 growth

Date : 15 December 2020

Nick Miles

Head of Insight - Asia Pacific

Metcash has reported H1 results for the period ending 31 October 2020 with sales revenue up 12.3% to AU$8,094m including charge-through sales and growth in sales volume across all pillars.

Food sales up 9.5% to AU$4,795.9m

Strong growth was achieved despite the loss of supply agreements to Drakes in South Australia in September 2019 and 7-Eleven in August 2020. Excluding these impacts, sales growth for the food division would be 16.3%.

Supermarket sales grew 14.6% to AU$4,123.2m or 18.2% excluding the Drakes impact. Sales have benefitted from both people preferring to shop at their local neighbourhood store, with growth seen across all states, particularly Victoria due to the stricter lockdown measures.  Progress has also been made against its MFuture initiative, which focuses on store quality, product ranges and price, helping attract more customers. IGA retail LFL sales grew 16.4%, with both average basket size and transaction numbers growing.

Convenience sales decreased 14.2% to AU$672.7m due to the ending of the 7-Eleven agreement. Excluding this sales would have grown 5.2%, with improved demand seen in remote and rural areas.

Liquor sales up 14.3% to AU$2,039.1m

Strong retailer sales more than offset trading restrictions of on-premise customers. Sales to the IBA retail banner group were up 24.1% with strong growth in Cellarbrations, The Bottle-O and IGA Liquor supported by an increase in people preferring to shop locally to home and increased in-home consumption. IBA retail LFL sales grew 27%. On-Premise sales have been impacted different across the country due to the variety in trading restrictions by state.

Positive outlook, but H2 growth will not be as strong as H1

Although heavily influenced by COVID-19, this is the strongest set of results that Metcash has reported for several years. Hardware sales were also up 20.6% and Metcash has reported that sales momentum has continued across all Pillars in the first five weeks of H2. It believes it is well set up to have a strong Christmas trading period, with more Australian’s this year traveling domestically. Further into H2, it will cycle softer trading periods from FY20 caused by the bushfires last year, then tougher comparatives in March / April due to COVID-19 elevating sales in 2020. The full impact of the termination of the 7-Eleven supply agreement will be seen in H2. Across all pillars, Metcash remains focused on making progress against its MFuture initiatives and retaining customers gained due to the pandemic. Keeping operational costs down, but maintaining COVID Safe work practices remains top of mind as well.

Independent retailers have responded and benefited in 2020

Group CEO, Jeff Adams, commented, “Our independent retailers delivered strong ‘like for like’ sales growth in the Food, Liquor and Hardware store networks. It was pleasing to see our retailers continuing to invest in growing their businesses, including new stores and refurbishments despite challenging circumstances. We remain committed to supporting this growth. Our retail banner groups are ideally positioned to continue benefiting from the change in consumer behaviour to more ‘local’ shopping, and their improved competitiveness supported by our MFuture initiatives is assisting them to retain new and returning customers to their stores.”