Metcash offering ‘honest value’ in wake of fake discounting case against Woolworths and Coles

Metcash boss Doug Jones says shoppers are continuing to include independent supermarkets in their ‘repertoire’ as IGA holds its market share.

Metcash CEO Doug Jones.

Metcash CEO Doug Jones says the wholesaler’s thousands of independent supermarkets are holding market share, despite competitive heat from Woolworths and Coles.

Mr Jones also said shoppers were visiting a range of stores to fill their baskets and continued to “include IGA and the independents in their repertoire”.

This was also in the face of a discounting war being waged by the heavyweight chains that has seen the Australian Competition & Consumer Commission launch court action against Woolworths and Coles over alleged fake discounts. Mr Jones declined to comment on the case but cheekily said Metcash was focused on providing shoppers with “honest value” and at prices “they can trust”.

During Covid-19 lockdowns, Metcash’s portfolio of independent supermarkets under banners such as IGA, Foodland and Ritchies were boosted as consumers shopped locally and kept away from crowded shopping centres and the centres’ big supermarkets.

Presenting Metcash’s half-year results on Monday, showing revenue up 8.1 per cent at $8.47bn, profit up 0.6 per cent at $141.8m and its interim dividend cut by 22 per cent, Mr Jones told The Australian that, although its food sales had held market share in the $120bn supermarket sector, it did not mean this was as good as it gets.

“It’s certainly true that Covid is a thing of the past, and it’s true to an extent that during Covid the local offer resonated with customers, and in some cases they rediscovered their local store, but what happened was what they found they really liked, and they stuck around,” Mr Jones said.

“And I’ve been saying this for three years now, and so what we are seeing with the current performance is that the offer has continued to improve. Every day our food teams, our independent retailers have clear and specific programs aimed at improving the quality of the offer to customers at every level.

“Whether it’s the store standards, it’s the appropriate offer and format for the particular market that we serve, whether it’s pricing, whether it's quality. And so we’re certainly not resting on our laurels, and we don’t think this is as good as it gets.”

Metcash boss Doug Jones said the price match offers at Metcash supermarkets give shoppers ‘confidence’ they’re not paying more than they should be. Picture: Brenton Edwards

On Monday Metcash, which also operates an extensive hardware wholesale business that includes retail banners Mitre 10 and Total Tools, as well as a liquor wholesaler, posted underlying profit of $134.6m, down 5.5 per cent and slightly ahead of some analyst forecasts. The result was mostly guided to the market in the lead-up to the results. The interim dividend of 8.5c a share was down from 11c for the same half last year, and is payable on January 29.

The results come as Woolworths and Coles face allegations from the ACCC of offering fake or illusory discounts to shoppers to lure them in, and which is now the subject of a court case.

Mr Jones said: “Obviously, I’m not going to comment on a court issue. We are very focused on providing our shoppers with honest value and giving them the opportunity to shop a wide range of products at prices they can trust.

“We have a number of pricing programs, including our price match program, which gives shoppers confidence that when they buy one of the thousands of products in our stores that are in the price match program, they’re not paying any more than they would at the local major supermarket.”

At its food and supermarkets arm, sales (excluding tobacco) rose 18.8 per cent to $4.2bn, reflecting growth in supermarkets and convenience stores and the inclusion of its acquired Superior Foods business from June 3.

Including tobacco, total food sales increased 10 per cent. Wholesale sales excluding tobacco were up 3.1 per cent. “What’s really pleasing, and we see it in the foot traffic, is that they (shoppers) continue to include IGA and the independents in their repertoire. It tells us that they continue to recognise that there’s value,” Mr Jones said.

Earnings at the food and supermarket pillar for Metcash rose 17.9 per cent to $119.9m.

Liquor sales rose 2.1 per cent to $2.5bn, with earnings down 3.3 per cent to $49.1m.

Metcash’s hardware pillar held market share in an environment of rapidly slowing trade activity. Total hardware sales rose 2.5 per cent to $1.8bn, buoyed by acquisitions and store growth in Total Tools.

On a like-for-like sales basis, total hardware sales declined 5.6 per cent. Hardware earnings fell 15.1 per cent to $93.9m, with both IHG and Total Tools delivering lower earnings compared to the prior corresponding half.

Metcash shares rose 2.2 per cent on Monday to $3.19.