The Metcash group improved both its liquor and hardware profits in the six months ended October 31, but this was more than offset by decline in food and grocery, which was impacted by the incremental investment in price in the first half of FY16.
Food and grocery sales rose 0.7 per cent to $4.54 billion. Supermarket sales were broadly flat, although, adjusting for the estimated impact of the storm disruption to Metcash’s NSW distribution centre, total sales would have been up around one per cent.
The trend in underlying supermarket sales, excluding tobacco, has improved from a 3.7 per cent decline (1H FY14) to around -0.4 per cent in the current reporting period.
IGA stores’ like-for-like retail sales increased 0.6 per cent, reflecting the continuing positive trend in retailer performance.
Convenience sales increased 3.7 per cent to $774 million. C-Store Distribution’s revenue continued to grow, but this was partially offset by a decline in Campbells’ reseller revenue.
Food and grocery EBIT declined 22.9 per cent to $91.9 million, reflecting price investment in supermarkets and a softer EBIT performance in convenience due to the sales decline in Campbells’ reseller business and lower margins from major customer contracts in CSD.
Group CEO Ian Morrice says Metcash continues to invest in its turnaround.
“While we’re still experiencing highly competitive trading conditions and price deflation, we’re seeing evidence the transformation plan is producing positive results across the group,” he said. “Importantly, we’ve seen a continuing improvement in the sales trend for the food and grocery pillar.
“We have also commenced ‘Working Smarter’, the next stage of the group’s transformation plan, designed to reduce complexity, make it simpler for customers and suppliers to do business with Metcash, and to reduce our cost of doing business.
“In addition, we will look to develop future growth opportunities and invest in new channels. Recently, we’ve begun exporting Australian product, sold direct to consumers in China through Alibaba’s online Tmall platform.”