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Metcash (ASX:MTS) share price in focus on solid trading update

The Metcash Ltd (ASX: MTS) share price is under the spotlight after the business gave a trading update at its annual general meeting (AGM).

Metcash is a supplier of products to IGAs, Foodland, IGA Liquor, Porters Liquor, Cellarbrations, Bottle-O and Thirsty Camel. It owns a few hardware brands including Total Tools, Home, Timber & Hardware, and Mitre 10.

Metcash share price

Trading update

The business announced at its AGM that in FY24 for the 18 weeks to 3 September 2023, its total sales had increased by 1.7%, with demand and sales continuing to be at “solid levels” with all pillars delivering sales growth. Growth can be a real support for the Metcash share price.

It said that increased cost of living pressures impacting some shoppers’ behaviour, but the differentiated offer of independents is “continuing to resonate with many”.

Food pillar

Total food sales excluding tobacco were up 6%, or 1.1% including tobacco. Total tobacco sales declined 11%, reflecting “acceleration of illicit trade and decline in smoking”.

More consumers are reportedly shopping around for promotions and discounts. Pleasingly, IGA continues to be included in shoppers’ choices. Metcash said that that wholesale price inflation, excluding tobacco and produce, was 7.3%.

Hardware

Total hardware sales had increased by 3.2%. Total Tools sales increased by 23.1%, reflecting “solid demand and the contribution from acquisitions.”

However, total IHG sales (Mitre 10, Home Timber & Hardware, and other small hardware operator earnings) were down 1%. Last year was strong, so it was hard to beat that – even so, retail network scan sales were up 1.1%, with DIY sales rising 1.8%. Trade activity was “down” on the prior year, but still at solid levels.

This segment is now the key generator of profit, so its success is important for the Metcash share price.

Liquor

Metcash reported that the liquor pillar’s total sales increased by 1.7%, with growth in retail partly offset by a decline in on-premises sales.

It said there was continued strong demand in the retail network and from contract customers. Perhaps unsurprisingly, the business said that there was an increased preference for more ‘value’ options.

The ASX share revealed that on-premises patrons are spending less.

Final thoughts on the Metcash share price

Metcash continues to impress me. The fact that it can keep growing its sales despite the difficult trading conditions is impressive, though it’s probably being helped by Australia’s rising population.

With long-term earnings growth seeming likely, with FY23 being a good example, and an ongoing good dividend, I’d say this is one of the better ASX dividend shares around.

$50,000 per year in passive income from shares? Yes, please!

With interest rates UP, now could be one of the best times to start earning passive income from a portfolio. Imagine earning 4%, 5% — or more — in dividend passive income from the best shares, LICs, or ETFs… it’s like magic.

So how do the best investors do it?

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At the time of publishing, Jaz does not have a financial or commercial interest in any of the companies mentioned.
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