Company Reports

Metcash's group sales increased 4% in the first 18 weeks of fiscal 2027, underpinned by growth in hardware and new supply contracts to petrol stations with tobacco. However, its costs are rising too and are weighing on near-term profits.

Metcash dominates the Australian wholesale distribution of packaged groceries to the independent retailer. From the small corner shop to the local independent supermarket, Metcash acts as a co-operative, funneling independent sales volume through a single channel to derive buying power to negotiate volume discounts with manufacturers. Metcash is the fourth force in the grocery industry, with around 10% market share via its IGA banner network, while Woolworths and Coles combined account for about two thirds of Australian food retailing, and Aldi also commands a comparable market share of around 10%.

Metcash dominates the Australian wholesale distribution of packaged groceries to the independent retailer. From the small corner shop to the local independent supermarket, Metcash acts as a co-operative, funneling independent sales volume through a single channel to derive buying power to negotiate volume discounts with manufacturers. Metcash is the fourth force in the grocery industry, with around 10% market share via its IGA banner network, while Woolworths and Coles combined account for about two thirds of Australian food retailing, and Aldi also commands a comparable market share of around 10%.

Metcash's fiscal 2026 underlying profit after tax of AUD 269 million is within management's tight guidance. Underlying earnings per share declined 2% to AUD 0.24, with a 6% fall in hardware EBIT the biggest drag on group operating profits. Shares fell modestly on the day.

Metcash is guiding to underlying profit after tax of AUD 268 million-AUD 270 million for fiscal year ending April 2026. Sales momentum in its two largest segments, food and hardware, improved slightly in the second half. So far, the Middle East conflict isn't materially affecting operating costs.

Metcash dominates the Australian wholesale distribution of packaged groceries to the independent retailer. From the small corner shop to the local independent supermarket, Metcash acts as a co-operative, funneling independent sales volume through a single channel to derive buying power to negotiate volume discounts with manufacturers. Metcash is the fourth force in the grocery industry, with around 10% market share via its IGA banner network, while Woolworths and Coles combined account for about two thirds of Australian food retailing, and Aldi also commands a comparable market share of around 10%.

Grocers supplied by Metcash are underperforming the two major chains, which are seeing much stronger growth online than in-store. Metcash's independents have limited exposure to this fast-growing channel. On the flip side, Metcash's sales are over-exposed to the shrinking legal tobacco market.

Metcash dominates the Australian wholesale distribution of packaged groceries to the independent retailer. From the small corner shop to the local independent supermarket, Metcash acts as a co-operative, funneling independent sales volume through a single channel to derive buying power to negotiate volume discounts with manufacturers. Metcash is the fourth force in the grocery industry, with around 10% market share via its IGA banner network, while Woolworths and Coles combined account for about two thirds of Australian food retailing, and Aldi also commands a comparable market share of around 10%.

Metcash's underlying net profit after tax declined 6% to AUD 127 million in first-half fiscal 2026. All three segments—food, liquor and hardware—were confronted with weak demand. Revenue was flat, and operating costs like labor and rents are increasing, weighing on EBIT margins. Shares fell 9%.

Growth in Metcash's wholesale sales to supermarkets, a proxy for its IGA network's performance, is lagging major supermarkets. Momentum is strongest at Coles, followed by Woolworths. However, Metcash's liquor wholesale sales suggest independents have an edge over the big chains now.

Household incomes are growing in real terms after a period of rampant inflation. With inflation back within the Reserve Bank of Australia’s target range, the focus is shifting to keeping the job market in good shape. Monetary settings are slightly restrictive, providing room for more easing.

Metcash dominates the Australian wholesale distribution of packaged groceries to the independent retailer. From the small corner shop to the local independent supermarket, Metcash acts as a co-operative, funneling independent sales volume through a single channel to derive buying power to negotiate volume discounts with manufacturers. Metcash is the fourth force in the grocery industry, with around 10% market share via its IGA banner network, while Woolworths and Coles combined account for about two thirds of Australian food retailing, and Aldi also commands a comparable market share of around 10%.

Metcash's fiscal 2025 underlying earnings of AUD 276 million are within management's tight guidance range announced two weeks ahead of the results. Underlying earnings per share declined 11% to AUD 0.25, with a 10% decline in hardware EBIT the biggest drag on group operating profits.

Metcash is merging its two hardware businesses. It expects the combination to help hardware CEO Scott Marshall drive growth by unlocking more scale benefits and improving the strategic alignment between Mitre 10 and Total Tools. However, management doesn't expect meaningful cost efficiencies.

Metcash dominates the Australian wholesale distribution of packaged groceries to the independent retailer. From the small corner shop to the local independent supermarket, Metcash acts as a co-operative, funneling independent sales volume through a single channel to derive buying power to negotiate volume discounts with manufacturers. Metcash is the fourth force in the grocery industry, with around 10% market share via its IGA banner network, while Woolworths and Coles combined account for about two thirds of Australian food retailing, and Aldi also commands a comparable market share of around 10%.

Tariffs are softening Australian consumer sentiment and investors are preferring defensive over cyclical retailers. Since sweeping US tariffs were announced April 2, our Morningstar Australia Consumer Defensive Index is up 3%, but the Morningstar Australia Consumer Cyclical Index is flat.

Retail spending is rebounding due to a larger workforce, higher wages, and meaningful fiscal stimulus. Discretionary categories are benefiting more than defensives from rising household incomes. But online growth is diluting supermarket profit margins.

Metcash dominates the Australian wholesale distribution of packaged groceries to the independent retailer. From the small corner shop to the local independent supermarket, Metcash acts as a co-operative, funneling independent sales volume through a single channel to derive buying power to negotiate volume discounts with manufacturers. Metcash is the fourth force in the grocery industry, with around 10% market share via its IGA banner network, while Woolworths and Coles combined account for about two thirds of Australian food retailing, and Aldi also commands a comparable market share of around 10%.

Metcash's adjusted net profit after tax of AUD 135 million for its first half fiscal 2025 was at the top end of the guidance range. Group after-tax earnings fell 6% on the prior year despite material contributions from food and hardware acquisitions.

Construction activity is softening. In the past six weeks since its annual general meeting, the sales momentum of Metcash's relatively high-margin hardware retail business deteriorated further. Although the segments labor costs are also declining, this is only partially offsetting the sales decline.