Hardware an area of opportunity for Metcash

Metcash is looking to move from groceries into hardware. Picture: NCA Newswire / Gaye Gerard

After making a number of acquisitions, the focus for Metcash is now selectively looking at hardware stores to buy.

Yet some wonder if the listed company that operates IGA stores could have a purchase of online hardware business HBT soon on its agenda to add to its existing stable of stores trading under brands such as Mitre 10 and Total Tools.

Hardware is the area of opportunity for Metcash, and HBT has been gradually building market share.

HBT describes itself as a buying group for independent hardware, building supplies, industrial, pain, rural, garden and timber retailers.

It started in 1997 with 13 member stores and has since grown to operate over 940 retail stores located throughout Australia.

Generally speaking through the retail market, though, it’s quiet on the deals front, with most battling the headwinds of the tougher economic conditions rather than searching for growth.

Market experts question whether a structural change is occurring in the retail industry that favours the discounting retailers, based on the recent trend with Black Friday.

Anecdotally, Black Friday sales helped large retailers, which experienced a lift of about 10 per cent sales lift over the past year, but smaller retailers were hard hit.

Yet most of the larger retailers are expecting softer trading in the lead up to Christmas.

The Reject Shop has recently been advertising strongly, which indicates its sales are likely up – that company has been flagged as a possible takeover target for some time.

Meanwhile, discount supermarket Aldi is said to be surging ahead, generating sales growth at about 10 per cent as it steals market share from Coles and Woolworths in what is a similar trend to Europe.

Pubs that serve food are also benefitting from consumers scaling down from five start restaurants, while indications of softening sales in Europe of luxury brands such as Louis Vuitton and Prada are also telling.

Aldi’s model is to have 660 products plus fruit and vegetables and will likely use the windfall to roll out more stores, presumably in the Western Australia and South Australia markets where it is under represented.

Meanwhile, Myer and David Jones CBD stores, where they generate about 20 per cent of their business, are thought to be impacted by recent protests in central Melbourne and Sydney which have been keeping shoppers away.