How Is Metcash Balancing Growth and Costs Amid Retail Challenges?

Metcash’s Financial Snapshot

Metcash Limited’s half-year financial results for the period ending 31 October 2025 reveal a business holding steady amid a complex retail environment. Group sales revenue edged up by a modest 0.1% to $8.48 billion, reflecting resilience in core operations despite headwinds in some segments. Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) increased 2% to $367.2 million, primarily driven by strong performance in the Food pillar.

However, earnings before interest and tax (EBIT) declined by 2.4% to $240.2 million. This drop was largely due to weaker results in the Liquor and Hardware pillars, compounded by increased depreciation and amortisation expenses linked to recent acquisitions, the new distribution centre in Victoria, and ongoing digital investments.

Segment Performance, Food Leads, Liquor and Hardware Lag

The Food segment demonstrated notable resilience, with EBIT rising 3.5% to $124.1 million. Growth was evident across both Supermarkets and Foodservice & Convenience channels, underscoring the success of Metcash’s strategic diversification beyond its traditional IGA core. This was achieved despite accelerated declines in tobacco sales and reduced strategic buying opportunities.

Conversely, the Liquor segment experienced a $5.6 million EBIT decline to $43.5 million. While the segment outperformed the broader market and gained share, the benefits were offset by lower wholesale price inflation impacting strategic buying, increased costs, and one-off integration expenses. The Hardware & Tools pillar saw sales growth amid a subdued trade market, but EBIT fell $3.9 million to $90 million due to margin pressures and higher depreciation costs.

Strategic Investments and Costs

Metcash continues to invest heavily in its Program Horizon technology initiative, aimed at modernising its wholesale operations and enhancing efficiency. Program Horizon incurred $7.7 million in costs during the half, with cumulative expenses now at $265.3 million. These investments are expected to position Metcash competitively for the future, with program completion targeted for FY27.

The company also absorbed integration and transition costs related to its new Mega Distribution Centre in Truganina, Victoria, and the recent acquisition of Steve’s Liquor Warehouse, which added eight retail stores across Victoria and Tasmania.

Balance Sheet and Dividend

Metcash’s balance sheet remains robust, with net tangible assets per share increasing to 17.2 cents. The company declared a fully franked interim dividend of 8.5 cents per share, consistent with the prior year, reflecting confidence in ongoing cash flow generation. Shareholders can also participate in a Dividend Reinvestment Plan to acquire additional shares.

Put option liabilities related to joint ventures, including Total Tools JV stores and Ritchies Stores, remain a notable feature of the balance sheet, with ongoing revaluations impacting reported earnings.

Outlook Considerations

While Metcash’s underlying profit after tax declined 5.9% to $126.7 million, statutory net profit remained stable at $142.2 million, supported by valuation adjustments. The mixed segment performance and continued investment in technology and infrastructure suggest a company balancing short-term pressures with long-term transformation.