Metcash surges on local switch

METCASH shares surged more than 7 per cent as the grocery, hardware and liquor wholesaler pleased the market with its half-year result.

It was the best performer on the ASX 200 as it rocketed 29c, or 7.3 per cent, higher to $4.24.

The results showed that Metcash benefited from the rising popularity of neighbourhood supermarkets, hardware chains and bottle shops. The growing shift of people moving away from cities to regional Australia also helped its network of independent stores.

Its revenue rose 1.3 per cent to $7.2bn for the six months to October 31, with net profit up 3 per cent at $128.8m.

The group – whose banner chains include IGA, liquor outlets Cellarbrations and hardware stores under the Mitre 10 retail brand – said it had also benefited from the ongoing refurbishment of stores, broadening its e-commerce offer and improving its price competitiveness under its MFuture strategy.

It added that strong sales had continued in the first five weeks of the second half of the 2022 fiscal year, buoyed by the shift in consumer behaviour and improved competitiveness of its retailer networks.

The food and liquor pillars are expected to benefit from a strong Christmas and New Year trading period and the extensive regional presence in its retail networks.

However, Metcash warned that it expected supply chain disruption, plus increased Covid-related and labour costs, particularly in distribution centres, in the second half.

Outgoing Metcash chief executive Jeff Adams said it had been a pleasing first half for Metcash and its independent retailers as it continued to build on the strong prior corresponding half.

“All pillars again benefited from the shift in consumer behaviour and improved competitiveness of our retail networks supported by the success of our MFuture program,” Mr Adams said. “The preference for local neighbourhood shopping and shift from cities to regional areas helped our independent retail networks all deliver ‘like for like’ sales growth in the half.”

“This is a significant achievement given the many challenges in the half including staff isolations, labour shortages, supply chain issues, continuously changing health regulations and other lockdown-related impacts.”

At Metcash’s flagship grocery pillar, total food sales fell 4.9 per cent, or 0.2 per cent excluding the fallout from losing the 7-Eleven contract.

Total liquor sales were up 6.6 per cent at $2.17bn with hardware sales soaring nearly 18 per cent to $1.48bn.

Metcash increased its interim dividend by 31 per cent to 10.5c a share, to be paid on January 28.