Retail sales offset on-premise decline for Metcash

07 December, 2020 by Andy Young

Metcash has reported its first half of the 2021 financial year, with strong growth in sales volumes across all four pillars of its business and strong earnings growth, with group underlying EBIT up 30.4 per cent to $203m.

In the liquor business the group said total liquor sales increased 14.3 per cent to $2bn, which reflects the strong demand in its retail network that more than offset the adverse impact of COVID-19 trading restrictions for on-premise customers.

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Speaking of the overall group result, Group CEO, Jeff Adams said: “It has been a standout first half for Metcash, with unprecedented sales growth underpinning a significant lift in earnings and cash generation.

“All Pillars have performed exceptionally well, adapting quickly to the many challenges associated with COVID-19 while continuing to successfully execute their strategic initiatives and champion the success of our independent retailers.

“Our independent retailers delivered strong ‘like for like’ sales growth in the Food, Liquor and Hardware store networks. It was pleasing to see our retailers continuing to invest in growing their businesses, including new stores and refurbishments despite challenging circumstances. We remain committed to supporting this growth.

“Our retail banner groups are ideally positioned to continue benefiting from the change in consumer behaviour to more ‘local’ shopping, and their improved competitiveness supported by our MFuture initiatives is assisting them to retain new and returning customers to their stores.

“All pillars reported an improvement in their earnings and margins, reflecting the positive operating leverage generated from higher sales despite investing in COVID Safe work practices.”

Metcash said of its liquor business that sales s to the IBA retail banner group increased 24.1% with strong growth in Cellarbrations, The Bottle-O and IGA Liquor supported by an increase in customer preference for local neighbourhood shopping, home consumption substituting ‘on-premise’ consumption and less overseastravel and duty-free sales.

Like-for-like sales in the IBA retail banner group increased 27 per cent. The business’ ‘on-premise’ customers are at various stages of recovery from the adverse impact of COVID-19 trading restrictions.

Liquor EBIT increased $9.4m (+30.6 per cent) to $40.1m reflecting the increase in sales volumes and the effective management of costs.

In Liquor, sales in the first five weeks of the year’s second half are up 16.9 per cent with continued elevated demand in the IBA retail network.

On-premise customers have started to recover in states with easing restrictions. Sales to the IBA retail banner group over the same five weeks are up 22.6 per cent. The business is continuing to progress its MFuture growth initiatives, particularly the expansion of its private and exclusive label range and digital strategy, while supporting customers adversely impacted by COVID-19 restrictions.

Adams said: “I am pleased to report that the Group has had a good start to the second half, with strong sales momentum continuing in all pillars in the first five weeks of trading. We are also expecting strong trading over the Christmas and New Year period.

“We are well positioned to service the expected strong demand, particularly in South Australia where earlier this month we opened our new purpose-built distribution centre. The new facility improves the competitiveness of our retailers in South Australia through providing them with a wider range of products and increased efficiencies.

“The Group’s strong underlying cash flows have strengthened our financial position. Metcash remains well placed to invest in growth opportunities, and continues to have a strong focus on costs.”