Tough times ahead, IGA owner Metcash tells investors

Grocery, liquor and hardware wholesaler Metcash’s supermarkets posted relatively strong sales growth since July, although the pace was below some analyst expectations.

IGA operator Metcash expects ongoing frugal behaviour by shoppers in fiscal 2025. Picture: Nikki Davis-Jones

Supermarket, liquor and hardware wholesaler Metcash expects challenging trading conditions and pressures on consumers to mount heading into Christmas.

Despite this, its flagship supermarket pillar posted relatively strong sales growth since July, although the pace of that food and grocery sales growth was below some analyst expectations which put pressure on the stock on Friday.

Metcash told investors at its annual general meeting on Friday that its supermarket sales were up 3.5 per cent for the past eight weeks, or down 1.9 per cent including tobacco, with wholesale food and grocery inflation of 2 per cent for the period.

Metcash chairman Peter Birtles said, in a trading update provided at the AGM, consumer confidence was being dented by the turmoil in the Australian economy, pushing shoppers to look for value, although the company’s operations were in good health.

“The current economic conditions remain challenging and continue to impact consumer confidence,” he said.

“As a result, we expect the shift in consumer behaviour to more value-conscious choices to remain in fiscal 2025. The company’s platform of three diversified businesses is fundamentally strong, and we have the right plans, teams and capabilities in place to deliver future growth as we work through the current economic cycle.

“We continue to work closely with our suppliers and shoppers to maintain a value offering with a wide range of products at competitive prices, and we are encouraged by our retailers’ adaptability and ongoing ability to meet shoppers’ needs.”

The AGM was told food and groceries, excluding tobacco, had continued to perform strongly in a highly value-conscious environment. The sales performance reflected volume growth and moderating inflation, demonstrating the business’s resilience and relevance of the independent network’s differentiated offer.

Supermarket sales for Metcash, whose banners include IGA and Foodland, were up 3.5 per cent. The continued dive in tobacco sales as a thriving black market trade steals shoppers from supermarkets hurt Metcash, with much of its supermarket retailer customers having a higher proportion of tobacco sales compared to rival supermarkets.

The sales growth for the independent supermarket chains which buy from Metcash was in comparison to Woolworths, which for the first eight weeks of fiscal 2025 had sales growth of 3 per cent, and Coles, which recorded sales growth of 3.7 per cent for the first eight weeks of the new financial year.

In liquor, with Metcash key retail banners including Cellarbrations and The Bottle-O, total sales increased 2.7 per cent over the past few months.

Hardware sales for Metcash through its banners including Total Tools, Mitre 10 and Home Hardware posted a 2.5 per cent sales lift for the start of fiscal 2025.