The Metcash Ltd (ASX: MTS) share price is under the spotlight after the company announced a FY27 trading update.
Metcash supplies IGAs across Australia with food, plus it has a food supply business that serves businesses such as hotels, restaurants and cafes. Metcash also supplies numerous independent liquor retailers across the country. The company also owns multiple hardware businesses including Total Tools, Home Hardware and Miter 10, among others.
FY27 trading update
The company is hosting its 2026 annual general meeting (AGM) to tell shareholders about FY26 and provide commentary about FY27.
In the first 18 weeks of FY27, total sales excluding tobacco rose 2.8%, or 3.5% including tobacco.
Now we’ll look at the individual segments.
Total food sales rose 2.6% excluding tobacco and 3.8% including tobacco. Within that, supermarket sales grew 2.6%, or 1.3% including tobacco. Foodservice and convenience sales grew 2.8%, or 11.3% including tobacco – within that, Superior Food sales rose 2.7%.
Metcash said that in supermarkets, sales have remained resilient despite a highly competitive trading environment. Tobacco sales has continued to improve, supported by strong trading in Queensland, NSW and Western Australia where regulatory measures have been implemented and effectively enforced.
Recent contract wins in petrol and convenience have supported a sales improvement, primarily in tobacco.
Turning to liquor, total sales rose 0.8%, with wholesale sales to premise customer rising 5.1%.
Metcash has seen further market share gains by ALM-supplied independents, though retail sales are being impacted by subdued consumer demand and elevated competitive industry. The New Zealand wholesale business is expected to be wound down over the coming months with a $2 million earnings impact.
Total Tools and hardware saw total sales grow by 6%. Within that figure, Total Tools sales rose 9.8% (with like for like (LFL) network sales growth of 3.8%. Hardware sales rose 5% (with LFL network sales growth of 5.4%).
Metcash said that strong sales momentum has been maintained, with market uncertainty continuing to impact the sector outlook. But, the tools and hardware division continues to make progress against the strategies aimed at returning the business to ‘mid-cycle’ margins.
Outlook for the Metcash share price
Metcash said that FY27 first-half earnings are expected to be impacted by an adverse sales mix in Superior Food, the removal of accelerated tobacco excise increase and persistent cost inflation in food and liquor.
Cost inflation pressures remain elevated, though cost-out programs remain on track. Current plans include reducing the impact on elevated cost pressures in food and liquor in the second half, while continuing to support the hardware pillar’s momentum.
Metcash is a solid business and I think there is clear scope to earnings to bounce if conditions improve for the hardware division, but at the moment that doesn’t seem likely in the near future.
This business could be undervalued, but there could be better ASX dividend shares around.
