The Metcash Ltd (ASX: MTS) share price is under the spotlight after the company gave a trading update in FY25.
Metcash has three main divisions. It has a food section, which includes supplying IGA supermarkets, and it also has a business called Superior Food that supplies business customers (such as cafes and hotels). Its liquor division supplies various independent liquor retailers. Metcash also has a hardware division which includes Mitre 10, Home Timber & Hardware and Total Tools.
Metcash AGM
The business is holding its annual general meeting (AGM) today, which is an opportunity for the company to review the last year and give some commentary about the new financial year.
Metcash said that in FY25, it’s delivering continued business performance in challenging markets. It’s “bedding down and extracting value” from recent acquisitions.
The company is working on cost and cash initiatives, as well as a transition to the new (Truganina) Victorian distribution centre and its opening. It’s also progressing its core technology initiatives.
Trading update
Metcash said that its FY25 group sales have been “strong” with growth in the food, liquor and hardware segments, partly helped by recent acquisitions. It gave a trading update to 8 September 2024.
The company said ‘food’ has continued to perform strongly in a “highly value-conscious environment”. The sales performance reflected volume growth and moderating inflation. Total food sales were up 17.9%, or 9.3% including tobacco.
Total supermarket and convenience sales increased 3.5%, though it was a decline of 1.5% including tobacco. Superior Foods sales grew 8.7%.
Metcash noted wholesale price inflation of 2%, excluding tobacco and produce.
Turning to liquor, total sales increased 2.7% with continued growth in wholesale sales to retail customers.
Finally, the hardware market has been “very challenging”, with trade activity softening even further. Retail stores are facing margin pressure due to lower volumes on fixed costs. Total hardware sales increased 2.5%, with Total Tools sales increasing 3.9% and the other businesses (collectively called IHG) seeing total sales growth of 2.1% (but a decline of 4.2% excluding the recently-acquired Alpine Truss and Bianco).
Final thoughts on the Metcash share price
Investors seemed to be largely expecting this from the company, with the share price little-changed.
The strength of the food division is impressive, while the hardware performance is disappointing. However, I’m expecting a recovery for the hardware division once interest rates start coming down in Australia. I think this could be an opportunity to invest for the hopeful economic upswing.