Metcash food sales up five per cent in strong overall result

Metcash has reported its full year results with its food division performing well delivering sales growth of five per cent and EBIT growth of 4.1 per cent to $200.3m, as part of a strong result for the group as a whole.

In Food, total sales increased five per cent (+7.7 per cent ex tobacco) compared with the prior corresponding period reflecting strong demand in both the Supermarkets and Convenience businesses. Supermarkets sales increased 4.5 per cent (+7.4 per cent ex tobacco) with continuation of the increased momentum experienced in Q4 FY22 and higher wholesale price inflation.

The improvement was ~$29m or ~17 per cent after adjusting for the adverse impact of 7-Eleven, a decline in the contribution from the resolution of onerous lease obligations and therebeing no tobacco excise increase in FY22.

The higher earnings reflects the strong trading performance, partly offset by additional costs related to COVIDSafe work practices and COVID-related labour costs related to absenteeism and penalty rates associated with extended operating hours at distribution centres.

Total Food increased 1.4 per cent to $9.5bn, or two per cent on a normalised basis (+13.4 per cent two-year basis). Excluding tobacco, total food sales increased 5.4 per cent or 3.8 per cent on a normalised basis (+11.9 per cent two-year basis).

Supermarkets sales increased 3.9 per cent or 1.9 per cent on a normalised basis (+13.8 per cent two-year). Like for Like sales in the IGA network increased 2.9 per cent (+14.6 per cent two-year basis) with continued support from shoppers rediscovering the convenience of local neighbourhood shopping and the improved competitiveness of the network.

Sales momentum in Supermarkets accelerated in the fourth quarter of FY22 increasing 13.8 per cent or 5.8 per cent normalised (+9.6 per cent ex tobacco normalised). Like for like sales in the IGA network increased 6.3 per cent (normalised) in the same period, reflecting market share gains and the impact of inflation.

Wholesale price inflation accelerated in the second half with price increases being received from ~60 per cent of the supplier base. Wholesale price inflation for the year was 0.5 per cent (1H22: deflation of 1.0 per cent, 2H22 inflation of 1.9 per cent).

Group CEO, Doug Jones said: “I am pleased to be presenting Metcash’s FY22 results, my first as Group CEO. The results are outstanding, another record year, and represent continued progress on the exceptional performance in FY21.

“At the outset I would like to thank Jeff Adams for his stewardship of the Company and his assistance in my transition into the Group CEO role earlier this year.

“Record sales growth led to a significant increase in underlying earnings and returns to shareholders.

“Our retail networks in Food, Hardware and Liquor all continued to perform well, further strengthening the health of our independent retail networks. On a two-year basis, like-for-like sales increased ~15 per cent in the IGA retail network, ~28 per cent across Hardware’s IHG and Total Tools retail networks and ~24 per cent in the IBA Liquor network.

Importantly, retailers are increasingly reinvesting in their stores, further improving the quality of their network primarily through the various store upgrade programs we support.

“We also further strengthened relationships with our independent retailers and were pleased to recently announce long term agreements to continue supplying Foodworks stores and Drakes Supermarkets in Queensland.

“The Group’s significant lift in earnings and strong financial position led to a ~23 per cent increase in total dividends for FY22, representing a 72 per cent increase on a two-year basis.

“Importantly, sales momentum has continued into FY23 with Group sales up ~nine per cent in the first seven weeks of the year and growth in all pillars, partly buoyed by the impact of inflation.

“While remaining focused on managing the supply change challenges, we are also helping shoppers manage the impact of inflation by providing better value options through a wider range of products at competitive prices.

“Going forward, our robust business model is supporting our pillars to manage well through the ongoing challenges, and we remain well positioned with a strong balance sheet and financial flexibility to continue progressing our MFuture plans,” Jones said.

Group underlying EBIT increased 17.7 per cent to $472.3m, while Group underlying profit after tax increased 18.6 per cent to $299.6m, and statutory profit after tax increased 2.7 per cent to $245.4m.

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