Metcash banks on renewed shopper enthusiasm

Shopper enthusiasm for local and less crowded supermarkets and hardware stores is paying early dividends for Metcash.

Metcash has bought a 70 per cent stake in Total Tools. Picture: Marc McCormack

Metcash chief Jeff Adams is hoping that this year the grocery, liq­uor and hardware wholesaler will produce a clean set of financial ­accounts following another year disrupted by writedowns and impairments, which sank it to a full-year loss of $56.8m for 2020, with sales in the first months of the 2021 financial year booming.

Mr Adams said shoppers were now returning to his retail partners’ independent supermarket chains such as Ritchies and IGA, as well as the wholesaler’s networks of hardware stores, with many coming back to shop for the first time in years to discover refurbished and rejuvenated stores.

This shopper enthusiasm for local and less crowded supermarkets and hardware stores was showing up in Metcash’s latest sales performance, with its core supermarkets arm reporting sales growth (excluding tobacco) of 16.7 per cent for the first seven weeks of the 2021 fiscal year, and hardware sales up 9.4 per cent for the seven weeks from the beginning of May.

The renewed embrace of independent retailers was being partly driven by the pandemic as shoppers shunned more crowded major retailers for local stores when they ventured from home isolation during the coronavirus health crisis.

“The customers who have come back have commented very positively on their experience now, where they had gone away from IGA before, and what the retailers are telling us is the new customers are saying ‘we haven’t been in here for a long time, the store has changed a lot, the range is better, the prices are better’,’’ Mr Adams said as Metcash posted a full-year net loss of $56.8m as writedowns and significant items of $268.5m eliminated profits.

“Same is true in hardware, where people were looking for their DIY projects. Bunnings was very busy and they decided to pass the Bunnings because either the car parks were full or queues outside, went to their local Mitre 10 or Home Timber & Hardware and actually found the shopping experience very pleasant.’’

Metcash is also looking to broaden its exposure away from supermarkets, and on Monday announced a deal to acquire a 70 per cent stake in Total Tool Holdings, a leading player in the professional tool segment, for about $57m. It also recently acquired two liquor businesses and is in talks over another hardware deal.

Metcash’s performance was ­affected by the loss of a key supermarkets supply contract in South Australia, the bushfires and then the coronavirus pandemic.

Metcash said gross revenue for the 2020 fiscal year rose 2.9 per cent to $13bn. Its flagship supermarkets division reported sales growth, liquor delivered its seventh consecutive year of sales growth, and hardware returned to positive sales growth in the second half due to a sharp lift in DIY projects.

Total food sales increased 3.5 per cent to $9.1bn, with IGA’s like-for-like retail sales up 5.6 per cent. Food EBIT decreased 2.8 per cent to $177.5m. In hardware, sales fell 1.3 per cent to $2.08bn reflecting the impact of the slowdown in construction activity on trade sales and the loss of a large Home Timber & Hardware customer. Hardware EBIT was in line with 2019 at $81.2m. Liquor sales rose 0.3 per cent to $3.68bn as EBIT fell slightly to $70.6m.

Metcash declared a final dividend of 6.5c, down from last year’s 7c, and payable on August 5.