Metcash Reviews Supermarket Arm; Eyes Potential Job Cuts

Metcash’s CEO, Doug Jones, has announced that the company is undergoing an extensive analysis of its primary supermarket division to adapt to the evolving retail environment. This may potentially lead to job cuts as the company aims to reduce expenses.

Although the primary goal of this review isn’t to reduce positions at the head office, Mr. Jones did not rule out the possibility, emphasizing the need to trim expenses in certain sectors. The intent behind the review and potential reorganization is to fortify Metcash and its primary supermarket segment against rising competition. This branch is responsible for supplying food and groceries to independent stores such as IGA and Foodland, contributing to 40% of the group’s earnings.

This development comes after The Australian reported that Metcash was re-evaluating its wholesale supermarket operations to address competitive challenges. Insiders indicate two primary focuses: one team is assessing the optimal future structure for the food and supermarket division, which brought in $9.6bn in revenue, while another is centered on cost-cutting, given the challenges posed by slowing inflation and dwindling sales revenue that are affecting profit margins.

Recent data has shown a marked deceleration in sales growth for Metcash’s food and supermarket sector, with its independent outlets losing ground to competitors like Woolworths, Coles, and Aldi.

Commenting on the move, Mr. Jones stated that such reviews are standard practice for robust businesses, ensuring their relevance in the future. He pointed out that Metcash’s recent appointment of Grant Ramage as the head of supermarkets is also geared towards refreshing their approach and strategies. Jones added that, while they are ramping up investments in certain sectors, they are also cautious about not over-investing.

Jones reiterated that while potential redundancies at their central office could emerge from this review, the primary focus isn’t on reducing staff. The overarching objective is to ensure a resilient, forward-looking business model.

Mr. Jones also acknowledged last week that independent supermarkets under Metcash’s umbrella, like IGA and Foodland, had experienced a decrease in market share against major competitors, but he emphasized their enduring competitiveness.

Metcash’s recent trading update showcased that in the 18 weeks leading up to September, total food sales, excluding tobacco, rose by 6%. However, when tobacco was included, the increase was just 1.1%, a drop from the 1.9% growth recorded in the initial seven weeks of fiscal 2024.

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