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Metcash sales lift amid virus restrictions

Prashant Mehra
Sales have continued to grow at IGA supermarket supplier Metcash in the new financial year

Wholesale distributor Metcash is benefiting from a continuing growth in sales as customers rediscovered neighbourhood supermarkets during the coronavirus pandemic.

The IGA supermarket supplier reported sales revenue for the 12 months to April 30 rose 2.9 per cent to $13.03 billion, led by growth in the food and liquor segments.

The group benefited from extraordinary demand levels in the food segment in March and April amid panic buying during coronavirus-related restrictions, but said total sales even before this period had increased 0.2 per cent.

The momentum has been maintained, with Metcash sales in the first seven weeks of FY21 continuing to benefit from a change in consumer behaviour.

Food sales are up 9.3 per cent, and supermarkets wholesale sales excluding tobacco up 16.7 per cent.

"Extraordinary demand levels in the food pillar in March and April resulted in strong sales in FY20," group chief executive Jeff Adams said.

"Importantly, the underlying sales trajectory of supermarkets wholesale sales continued to strengthen in 2H20, with sales growth delivered for the first time since FY12."

The success of strategic initiatives together with a shift to more local neighbourhood shopping during COVID-19 has resulted in market share gains for the IGA network, he added.

Metcash shares jumped on the news, despite the company reporting a statutory full-year loss of $56.8 million after taking a non-cash impairment charge in the first half.

By 1300 AEST, Metcash shares were up 3.9 per cent at $2.94.

The sales growth comes despite the loss of the 7-Eleven supply contract, worth an estimated $800 million in sales annually, during the first half.

The company had announced a $237.4 million non-cash impairment against goodwill and other assets as a result.

For the full year, its supermarket food sales increased 3.8 per cent to $7.5 billion.

Total liquor sales increased 0.3 per cent to $3.68 billion, despite being adversely impacted by COVID-19 restrictions in March and April due to the closure of customers' 'on-premise' businesses in Australia and New Zealand.

Hardware sales decreased 1.3 per cent to $2.08 billion reflecting the impact of the slowdown in construction activity on trade sales and the loss of a large customer in the first half.

The company said there was a significant improvement in second half hardware sales as the COVID-19 lock downs encouraged people to start DIY projects.

"Our hardware pillar delivered sales growth in the second half, with March and April sales benefiting from COVID19 restrictions," Mr Adams said.

An increase in demand in DIY categories such as paint and garden helped offset a decline in Trade sales due to the slowdown in construction activity. "

The company will pay a fully-franked final dividend of 6.5 cents per share.

Metcash said sales in the first seven weeks of FY21 have continued to benefit from a change in consumer behaviour.

The earnings benefit from the increase in sales continues to be marginally offset by higher costs to service the elevated demand and manage health and safety risks, it said.

Liquor sales have increased 5.5 per cent for the same period, while hardware sales are up 9.4 per cent, underpinned by continuing strong demand in DIY categories.

METCASH FULL YEAR SALES RISE

* Revenue up 2.9pct to $13.03b

* Net loss $56.8m vs $192.8m profit year ago

* Fully franked interim dividend 6.5 cents, down from 7.0 cents year ago