Metcash has reported a surge in underlying EBIT of 63.8 per cent against pre-Covid levels of three years ago in a result CEO Doug Jones described as “a pleasing half”.
In the six months to October 31, group revenue was up 8.2 per cent year on year to $7.7 billion, with underlying profit reaching $255.1 million, up 10.3 per cent on-year.
Profit after tax of $125.7 million was up by 182.9 per cent compared with three years ago.
Jones said the growth was achieved despite strong inflation rates and while cycling the impacts of lockdowns in the first half of the last fiscal year.
“Importantly, the business continued to build on its record performances post the onset of Covid, achieving exceptional growth over the past three years in all pillars.”
“Feedback from our retailers is that many shoppers have now changed their shopping habits to include local grocery, liquor and hardware stores,” he said, adding that keeping on-shelf prices highly competitive supported strong sales volumes across all pillars.
“Our independent retail networks performed well. Overall network health continued to strengthen, and retailers are operating with a high level of confidence and reinvesting to further improve the quality of their stores and offer,” Jones said.
Liquor was a standout, with three-year pre-tax earnings growth of 60.6 per cent. Food sales – excluding tobacco – increased by 6.5 per cent on year, or by 23.7 per cent over three years ago.
Jones attributed much of the improved sales performance to consumers’ increased preference for local neighbourhood shopping, as they recognise shoppers and enjoy increased competitiveness, a differentiated offer and the relevance of the company’s network of independent stores.
“The success of our investments in Total Tools and IHG, and significant growth in the underlying performance of the hardware pillar, has led to a rebalancing of the group’s earnings profile with Hardware now the largest contributor.
“We now have around 160 company-owned or joint venture stores in our hardware network that together are delivering significant sales growth.”
All of Metcash’s pillars have continued to trade well in the first four weeks of the second half year, with group sales up 6.2 per cent.
Jones said Metcash continues to prioritise volume growth – its core value driver – to keep its retail partners competitive, particularly as they face their own cost pressures. The company also benefitted from an easing of the supply-chain challenges of FY22.
However, while supply-chain challenges have improved, they continue to be a risk for all pillars in the half year ahead, said Jones, “as do additional fuel, freight and labour costs”.
“There continues to be uncertainty over the level of inflation going forward, as well as how the impact of inflation and other cost-of-living increases may impact consumer behaviour in the retail networks of our pillars, and Metcash.”
