The Metcash Ltd (ASX: MTS) share price is up 5% after the company announced a FY26 update.
Metcash supplies IGA supermarkets around Australia and the business has a segment that supplies business customers. It also supplies various independent liquor businesses in the country. The company also has a hardware business that includes brands like Mitre 10, Total Tools and Home Hardware.
FY26 update
The company announced that it expects to report underlying net profit after tax (NPAT) of between $268 million to $270 million for the year to 30 April 2026.
It’s expecting to report group revenue growth of 0.7%, or 3.8% excluding tobacco.
Metcash said that it has delivered a resilient performance in food and liquor, with the liquor EBIT (EBIT explained) margin recovering in the second half of FY26.
The company also reported improved sales momentum in hardware and tools in the second half of FY26, with structural cost actions underway. This reflected pricing and ranging initiatives. However, trade market conditions remained “soft”, with recovery timing extended. Earnings have been impacted by margin pressure.
The company revealed that supermarkets remained “competitive”, supported by promotional programs. Foodservice and convenience delivered strong growth, driven by customer growth.
In Liquor, Metcash-supplied independents continued to gain market share, including an on-premise recovery in the second half.
FY26 group EBIT is estimated to be between $501 million to $505 million. Food EBIT is expected to be between $259 million to $262 million, liquor EBIT is predicted to be between $98 million to $101 million and hardware & tools EBIT is projected to be between $175 million to $179 million.
Cash and cost-saving plans
Metcash said that it’s achieving a strong cash performance, supported by effective cost and working capital discipline.
The business also noted that additional cost initiatives are underway, with at least approximately $25 million of annualised savings in FY27. That includes around $15 million in labour savings, as well as $10 million non-trade procurement savings.
It noted that there has been no material impact on FY26 earnings from increased freight or product costs. Impacts have mostly been offset through pricing mechanisms and active management.
Final thoughts on the Metcash share price
Despite today’s rise, it’s still down by 26% in the past six months. It has a low price/earnings (P/E) ratio, and it could be undervalued.
It could be cheap, if it’s able to deliver earnings growth from here. The business is doing its best to maintain and grow market share
But, it’s not a business I’m expecting to invest in it myself. There are other ASX dividend shares I’d rather invest in which have an easier path to market-beating profit growth.
