Metcash shares are tanking after losing a major customer

Photo: Getty Images

Shares in Metcash fell hard after the operator of IGA supermarkets announced the loss of a major customer in South Australia.

At the close, the shares were down 17.6% to $3.03.

The company says Drakes Supermarkets will not be making a commitment to have its supermarkets in South Australia supplied from Metcash’s proposed new distribution centre in the state.

Total sales to Drakes were $270 million in 2018.

Metcash has an agreement with Drakes Supermarkets in South Australia to supply its stores to June 2019. It also has a supply arrangement with Drakes in Queensland.

“Metcash is assessing the implications of this advice from Drakes Supermarkets,” the company says.

The company says current year earnings are expected to be in line with last year.

Metcash managed to lift profit 24% to $92.9 million in the first half despite a slump in sales at its IGA supermarkets. The company’s IGA retail network recorded a decline in like for like sales of 1.1%.

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.