Metcash gains momentum from transformation plan, pricing strategies

Metcash Limited announced that Group sales revenue increased 1% to $6.6 billion on the prior comparable period for its half-year ended October 31, 2014, while underlying Profit after Tax decreased 9.0% to $101.7 million due to ongoing operating deleverage and as investment in the MFG strategy commenced.

However, Metcash’s Transformation program is making progress and returning retail sales growth to positive territory. Group CEO Ian Morrice said that recent trading, with additional stores transitioning to the Diamond program, “show signs of a sales led recovery and a positive momentum is encouraging to see as we lead into Christmas”.

For Metcash Food & Grocery in Supermarkets, wholesale sales to IGA and independent supermarkets were down 0.9% or -1.5% like-for-like stores, while retail scan sales rose 0.9% LFL with an improving trend in Q2.

In convenience, sales rose 8.8% (+7.4% LFL) with continued channel growth, new business integration and the continued development of total supply solutions to existing CSD customers, Metcash said.

“Price Match was activated in 425 IGA stores by the end of October and three stores piloted the Diamond program in the half, with 11 now operational and 29 stores approved to proceed,” Metcash said.

Transformation initiatives in Fresh, Convenience and Black & Gold are showing encouraging early signs, with retail scan sales gaining momentum as the network started transitioning to shopper-led category management.

In ALM (Liquor), there were robust sales in Metcash’s retail bannered independent groups, while sales to wholesale contract independent groups decreased as these stores lost market share to organised groups and the self-supply chains, Metcash said. Continued decline in liquor consumption contributed to lower overall volumes resulting in a 3.6% decline in ALM’s total sales.

“Whilst it is early days, the Diamond Store Accelerator pilot stores have driven increased customer transactions and basket size for stores; and the introduction of the Competitive Pricing strategy, Price Match, has reversed the negative sales trajectory in the 425 participating IGA stores who have enrolled since the start of October,” Mr Morrice said.

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