Metcash Limited’s Shares Uplifted on ASX After Providing Strategy Update

Australia’s leading wholesale distribution and marketing company, Metcash Limited (ASX: MTS) has provided a strategy update to its shareholders. In the strategy update, the company provided information about its current position with regards to its three main divisions- Food, Liquor and Hardware.

Metcash Limited’s Australian Liquor Marketers (ALM) is the second-largest broad range of liquor wholesaler in Australia. ALM provides wholesale supply to several contract customers, unbannered liquor stores and to the ‘on-premise’ channel.

The company’s Independent Brand Australia group (IBA) supports more than 2,700 stores across leading independent retail brands. IBA retail network has grown to around 55% share of total ALM business. Further, the company also informed that its IBA network is well positioned to meet the current shopper trends.

The IBA retail network is consists of ~1,600 Tier 1 bannered stores across Australia & New Zealand. IBA supports independent retailers through its national buying power, marketing support, shopper-focused promotional programs and network investment to provide ‘Best Store in Town’.

Metcash’s Independent Hardware Group is the 2nd largest player in the Australian hardware market with sales of over $2 billion. Through the integration of HTC, the company has delivered significant synergies. Currently, the company has 90 corporate stores (company-owned / JV stores) with 36 stores in HTH and 54 stores in Mitre 10. Corporate stores make up around 40% of IHG wholesale sales.

In the company’s Food division, the company is having a diverse network of local independent grocery stores. The company’s vision is to be the partner of choice for retailers and suppliers delivering a shopper-led range with the right prices through a responsive distribution network.

In the past five years, the company has faced significant headwinds in its food division due to intense competition, deflation and roll out of value formats.  The company is a national network of more than 1,650 stores.

The company is going to fundamentally change its retail network by having a clear proposition for shoppers and a differentiated range. Further, the company is going to enforce standards that will protect the integrity of the brand. The company is also going to have better pricing for retailers who comply with promotional programs. The company is well positioned to capitalize on the shopper trend to convenience.

While providing the trading update, the company informed that its year to date total Food sales are marginally higher than the corresponding prior year period. In Supermarkets, the rate of decline in wholesale sales ex-tobacco is broadly in line with that reported for 1H19. The Liquor sales in the second half of 2019 have remained strong supported by increased wholesale customer volumes. Further, the Hardware sales in 2H19 have softened reflecting the slow-down in construction activity in the Trade sector.

Meanwhile, in the last six months, the share price of the company decreased by 5.45% as on 1 March 2019. MTS’s shares last traded at $2.670 with a market capitalization of circa $2.36 billion as on 4 February 2019.


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