Metcash
Metcash loses 7-Eleven contract

Metcash has reported its first half of the 2021 financial year, with strong growth in sales volumes across all four pillars of its business and strong earnings growth, with group underlying EBIT up 30.4 per cent to $203m.

In the food business, the group said total food sales increased 9.5 per cent to $4.8bn or 16.3 per cent excluding the impact of Drakes and 7-Eleven, which have both ceased supply with Metcash.

Speaking of the overall group result, Group CEO, Jeff Adams said: “It has been a standout first half for Metcash, with unprecedented sales growth underpinning a significant lift in earnings and cash generation.

“All Pillars have performed exceptionally well, adapting quickly to the many challenges associated with COVID-19 while continuing to successfully execute their strategic initiatives and champion the success of our independent retailers.

“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.

“All pillars reported an improvement in their earnings and margins, reflecting the positive operating leverage generated from higher sales despite investing in COVID Safe work practices.”

Metcash said of its convenience business, sales were impacted by the loss of 7-Eleven, decreasing by 14.3 per cent. But excluding the impact of 7-Eleven, sales increased by 5.2 per cent, with improved demand in rural and remote areas.

The IGA network performed strongly with like for like sales increasing by 16.4 per cent, reflecting growth in both average basket size and number of transactions, which resulted in the IGA network gaining market share.

In supermarkets, total sales increased 14.6 per cent to $4.1bn and 18.3 per cent excluding the Drakes impact.

Supermarket sales excluding tobacco increased 13 per cent, reflecting a change in consumer behaviour to more home cooking, an increase in the preference for local neighbourhood shopping and the success of Metcash’s MFuture initiatives.

MFuture focuses on store quality, product ranges and prices, and have further improved the competitiveness of the retail network.

Food earnings increased by 16.5 per cent to $103m, reflecting strong growth in sales volumes and an increase in the contribution from joint venture stores.

The significant increase in earnings was achieved with no contribution from the resolution of onerous leases, no sales from Drakes in South Australia and only three and a half months of 7-Eleven sales.

Adams said: “I am pleased to report that the Group has had a good start to the second half, with strong sales momentum continuing in all pillars in the first five weeks of trading. We are also expecting strong trading over the Christmas and New Year period.

“We are well positioned to service the expected strong demand, particularly in South Australia where earlier this month we opened our new purpose-built distribution centre. The new facility improves the competitiveness of our retailers in South Australia through providing them with a wider range of products and increased efficiencies.

“The Group’s strong underlying cash flows have strengthened our financial position. Metcash remains well placed to invest in growth opportunities, and continues to have a strong focus on costs.”

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