Metcash (ASX: MTS) shares are up another 1% today after yesterday’s announcement of the FY20 result.
What is Metcash?
Metcash is a leading wholesale distributor of supermarket products and the owner of popular retail brands like IGA, Mitre 10 and Foodland. In liquor it owns The Bottle-O, Cellarbrations and Duncans.
What did Metcash report?
The company reported that revenue group increased 2.9% to $13 billion and including charge through sales, group revenue was up 2% to $14.9 billion. Sales growth in the Food and Liquor pillars was partly offset by a decline in Hardware.
Total Food sales (including charge through sales) increased 3.5% to $9.1 billion. In Supermarkets, total sales increased 3.8% to $7.5 billion. Total supermarket sales for the 10 months to February (before COVID-19) increased 0.2%. Food EBIT (click here to learn what EBIT means
) (pre AASB16) decreased $5.2 million to $177.5 million, however underlying EBIT improved by $12 million, after adjusting for the decline in the contribution from the resolution of onerous lease obligations and the impact of ceasing to supply Drakes in South Australia.
Total Liquor sales (including charge through sales) rose by 0.3% to $3.68 billion despite difficult COVID-19 impacts. For the 10 months to February 2020, sales were up 2.2%. Liquor EBIT decreased $0.6 million due to low sales growth and higher COVID-19 costs.
Hardware sales (including charge through sales) decreased 1.3% to $2.08 billion after a slowdown of construction activity and the loss of a large Home Timber & Hardware customer. Hardware EBIT was flat at $81.2 million.
Metcash reported a statutory loss after tax (post AASB16) of $56.8 million, this includes the impairment to goodwill and other assets of $242.4 million after 7-Eleven said it wouldn’t renew its supply agreement with Metcash.
Metcash announced a final dividend of 6.5 cents per share.
Summary
Food sales continue to be elevated in light of COVID-19, up 9.3% in the first seven weeks of FY21, and DIY demand is helping hardware – up 9.4% in FY21.
Pleasing signs for FY21, but Metcash isn’t the business I’d invest in for growth or defensive dividends. I’d go for something like WHSP (ASX: SOL) instead.
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Disclosure: At the time of writing, Jaz owns shares of WHSP, but this could change at any time.
