Metcash managed to lift profit 24% to $92.9 million in the first half despite a slump in sales at its IGA supermarkets.
Food sales fell 1.4% to $4.36 billion and supermarket sales by 0.8% to $3.63 billion with “intense competition” in a tough market.
“The first half results were very pleasing despite the continuation of some of the most challenging market conditions in our history,” says CEO Ian Morrice.
“Both Liquor and Hardware continued to perform well.”
Hardware sales jumped 83% to $1.06 billion over the six months. The latest results include one month of sales, $51.5 million, from Home Timber & Hardware group, which it bought from Woolworths.
Overall sales revenue was up 7.6% to $7.06 billion.
The company’s IGA retail network recorded a decline in like for like sales of 1.1%.
Convenience sales fell 4.6% to $723.6 million, reflecting reduced sales of tobacco and drinks.
Grocery prices kept falling. Over the six months they fell by an average 2.7%, with significant competitor investment in price and promotions.
The results by division:
Among the bigger competitors, only Woolworths has managed sales growth. In the latest market update, Australian food sales at Woolworths were up 4.7% to $9.63 billion in the first quarter of 2018. Like for like sales were 4.9%.
“Competitors also continued to expand their footprint, particularly in South Australia, and Western Australia where economic conditions remain challenging,” says Morrice.
Sales continued to improve on the eastern seaboard.
“We are now half way through our three year Working Smarter program, and the initiative is delivering significant benefits, particularly in our Supermarkets business,” says Morrice.
“The savings achieved have been a key factor in Supermarkets maintaining its earnings, despite the significant headwinds that include a continuing high level of deflation.”
Results for the half year to the end of October: