Metcash Eyes $268-270m NPAT Backed by Cost Cuts and Hardware Recovery

Solid Profit Outlook Amid Challenging Market

Metcash Limited (ASX:MTS) expects to deliver an underlying profit after tax (NPAT) of $268 million to $270 million for the year ended 30 April 2026, reflecting resilience across its diversified portfolio. The result is underpinned by a stronger second half, particularly in the Hardware & Tools segment, and disciplined cost control efforts. Group revenue grew a modest 0.7% to $19.6 billion, or 3.8% excluding tobacco, highlighting the ongoing impact of tobacco sales decline on the top line.

CEO Doug Jones emphasised the group's ability to maintain steady performance despite a tough retail environment, noting that "Hardware & Tools maintained share in a soft Trade market, with improved second half sales momentum." This follows earlier signs of stabilisation in the segment, which had faced margin pressures especially in Victoria and Tasmania. The company is now pursuing structural cost actions to bolster this business for a cyclical recovery in residential building activity.

Segment Performance and Margin Recovery

The Food and Liquor pillars delivered resilient results, with Food revenue slightly down 0.6% overall but up 5.4% excluding tobacco. Supermarkets grew 2.6% excluding tobacco, supported by promotional programs such as Extra Specials, while Foodservice & Convenience sales surged 14%, driven by new customer wins and contract growth. Tobacco sales declined 29%, but mitigation initiatives and regulatory enforcement helped improve sales trends and supported margin gains through a lower tobacco mix.

Liquor sales increased 1%, with wholesale growth to on-premise customers up 6.4%. Metcash-supplied independents continued to gain market share, aided by a multi-channel strategy and convenience offerings. Importantly, EBIT margin in Liquor returned to long-term levels in the second half, reversing earlier pressures.

Cost Discipline and Cashflow Strength

Metcash’s cash management remains a highlight, with cash realisation expected to exceed the targeted 80-90% range over three years and debt leverage at the low end of the 1.0-1.75x target. Capital expenditure was tightly controlled at approximately $170 million, $30 million below guidance, reflecting active management amid supply chain uncertainties. The group also prudently increased inventory by around $80 million as a buffer against geopolitical risks, including the Middle East conflict, which so far has had no material impact on earnings.

Further cost-saving initiatives are underway, targeting at least $25 million in annualised savings for FY27. This includes around $15 million in labour savings, mostly from Hardware & Tools, and $10 million in non-trade procurement efficiencies. A restructuring cost of approximately $6 million is expected in FY27, with payback anticipated within 12 months. These programs build on previous efforts to align the cost base with market conditions and support future growth.

Positioning for Stability and Growth

Metcash’s ability to navigate a complex retail landscape with mixed segment performance is notable. The company’s steady revenue growth and margin recovery in Liquor, combined with accelerating sales momentum in Hardware & Tools, suggest improved operational leverage. This comes after a period of flat or declining tobacco sales, a challenge Metcash has addressed through diversification and strategic initiatives.

Cash flow strength and disciplined capital management provide a buffer against ongoing market uncertainties, including supply chain risks and geopolitical tensions. The company’s focus on cost efficiency and margin protection will be critical as it aims to sustain performance in FY27 and beyond.

Investors familiar with Metcash’s earlier half-year results will recognise the continuity in themes of margin pressure, tobacco decline, and digital expansion, as discussed in the company’s steady FY26 half-year results and tobacco decline with diversified growth. The full audited FY26 results due on 22 June will provide further clarity on the sustainability of these trends and the impact of cost initiatives.