Metcash reports tough H1

Date : 29 November 2016

Metcash has released H1 results for the period ending 31 October 2016, with sales revenue up 0.3% to AU$6,629m, but group EBIT down 4.2% to AU$128m.

Food & Grocery sales declined 1.2% to AU$4,488m

Supermarket sales declined 1.0% to AU$3,729m, with uplifts generated from new store openings and strategic initiatives being offset by store closures, deflation, competitor promotional activity and Aldi's expansion in South and Western Australia. IGA store LFL sales increased 0.3%, representing the fifth successive period of sales growth, driven by improvements to the store network, with 41 new stores brought into the Diamond programme. Convenience sales declined 2.0% to AU$759m, with the growth of C-Store Distribution offset by declines in Campbells reseller volumes. Food & Grocery EBIT declined 9.1% to AU$85m, with supermarket earnings impacted by tough trading conditions and convenience reporting a loss of AU$4.3m.

Liquor sales up 1.6% to AU$1,560m

The strong performance of the IBA network and continued conversion of retailers to Metcash's banners helped drive sales growth, with wholesale sales via the network growing 6.1% and LFL sales up 2.5%. Approximately 60 stores were refreshed in the half, with category and range extensions into higher value products, plus continued private label growth helping performance. EBIT also grew 4.6% to AU$27.1m, reflecting improved performance and also savings from the retailer's Working Smarter Programme.

Hardware sales up 9.6% to AU$582m

Mitre 10 sales were in line with the same period last year, despite unseasonal weather, cycling store closures and competitor liquidation. Sales were boosted by the acquisition of Home Timber & Hardware.

More headwinds to negotiate in H2

Metcash expects continued momentum in liquor and hardware in H2, however food & grocery will continue to be challenging, as Aldi continues its expansion into the new states and competitor price activity intensifies further. Metcash will continue to press ahead with its Working Smarter cost savings, refreshing a further 60 supermarkets, launching its new Community Co. mid-tier private label and repositioning its convenience business.