Metcash, a prominent wholesale distributor, is experiencing a growth in sales bolstered by its food, alcohol, and hardware sectors. However, the company also highlights a shift in consumer behavior due to financial pressures, resulting in increased preference for affordable products.
CEO Doug Jones informed the AFR Weekend that another concern is the rise in illicit tobacco sales impacting its IGA and Foodland grocery branches. He observed a trend where customers are looking for promotional offers and switching to frozen food products, even though the in-store foot traffic remains positive. Jones mentioned, “Consumers are becoming more selective with their purchases, focusing on deals and sometimes switching brands.”
From the start of the year till September 3, Metcash’s total sales have grown by 1.7%. Specifically, their food section spearheaded by IGA has seen a 6% surge excluding tobacco sales, which only experienced a 1.1% increase. However, this growth has decelerated compared to the initial 1.9% growth in the year’s first seven weeks.
There was a slight decrease in wholesale price inflation, from 8% in May to 6.1% in August, not counting tobacco and fresh produce. Supermarkets’ wholesale figures (excluding tobacco) grew by 6.2% this year. Additionally, a significant 11% drop in tobacco sales this year was noted, compared to 6.8% in 2023. This decrease is attributed to the rise in illicit tobacco trade and a decrease in smoking, a concern previously highlighted by The Australian Financial Review.
Peter Birtles, the Chairman of Metcash, stated that the firm has seen impressive growth in recent years, bolstered by population growth and increased government spending on infrastructure and housing projects.
Group hardware sales surged by 3.2% this year, boosted by a significant 23.1% growth at Total Tools. However, this growth was counterbalanced by a 1% dip in sales at the Independent Hardware Group (IHG) – encompassing brands like Mitre 10 and Home Timber & Hardware – where trade sales remained static. In comparison to its competitor Bunnings, IHG’s network sales growth was a bit behind, at 1.1% against 2.1%.
In the liquor sector of Metcash, a modest 1.7% growth was seen this year, but this was somewhat negated by a decrease in sales at bars and clubs. Notably, Metcash stands as the premier supplier to independent liquor outlets like Cellarbrations, The Bottle-O, and IGA Liquor.
While the growth in food and liquor sales in the first 18 weeks of the year fell slightly short of analysts’ predictions, the hardware sector outperformed, mainly due to Total Tools. Phil Kimber, an E&P analyst, anticipates a decrease of 9.8% in the hardware division’s earnings before interest and tax in this year’s first half. Kimber highlighted that Metcash’s primary businesses had benefitted from the pandemic-induced surge in local shopping and housing investments, though this momentum might soon wane, predicting a 7% EPS drop for the fiscal year 2024.
For the latest retailer news and information, check out the IndiHub website or to speak to us about how we can help your business contact us.
