The Metcash Limited (ASX: MTS) share price is up 4% after announcing a solid FY23 report.
Metcash supplies IGA supermarkets, liquor stores like Thirsty Camel, Big Bargain Bottleshop and Duncans. It owns the Mitre 10, Home Timber & Hardware and Total Tools brands.
Strong Metcash FY23 result
Metcash reported some solid numbers for the 12 months to 30 April 2023:
- Revenue increased 6.2% to $15.8 billion
- Underlying EBIT (EBIT explained) rose 8.1% to $500.8 million
- Underlying net profit after tax (NPAT) grew 4.6% to $307.5 million
- Statutory NPAT grew by 7.6% to $259 million
- Underlying profit / earnings per share (EPS) went up 6.4% to 31.8 cents
- Total annual dividend per share rose 5% to $0.225
Metcash revealed that all pillars continued to perform well. The food pillar EBIT saw EBIT growth of 3.8% thanks to sales growth and improved leverage, “supported by an improved retail network that is more relevant and competitive than ever before.”
The hardware division continues to see profit growth, with an EBIT rise of 16.8%. Metcash said there was robust underlying demand. The company said the strategy of investing in its own stores, often with independent partners, has “proved to be a very effective growth driver.” This is very helpful for the Metcash share price.
Liquor also saw a good performance, with EBIT rising by 8.9%, thanks to ongoing strong sales to retail customers and a recovery of on-premise sales, which were cycling against COVID restrictions.
The outlook can have an important influence on the Metcash share price, and things are looking positive.
Outlook commentary
Sales growth has continued into the first seven weeks of FY24, with “all pillars continuing to perform well.” Group sales increased 2.3% with the rate of growth in food similar, and hardware up, compared to the second half of FY23.
In the first seven weeks, food sales were up 6.8%, hardware sales were up 5% and liquor sales were up 1.2%.
While demand “continues to be solid” in all pillars, the impact of higher interest rates and cost of living has “started to impact consumer confidence and the behaviour of some customers and shoppers in our retail networks.”
There are cost pressures, particularly in labour, as well as a $10 million higher tax bill in Victoria following changes to workers compensation, payroll and land tax.
Metcash said that it’s well positioned to continue delivering growth and superior returns for shareholders through the cycle, with fundamentals supported by “high unemployment, increasing population and immigration, and continued government investment in infrastructure and housing.”
I think the Metcash share price is still attractively priced at 12x FY23’s underlying earnings, with a good dividend yield and further potential growth to come.
