Metcash Faces Execution Risks Despite Strong FY25 Performance and Expansion

Solid Financial Performance Amid Challenging Conditions

Metcash Limited has delivered a robust set of full-year results for FY25, demonstrating resilience and growth across its diversified wholesale and retail operations. The company reported a 7.2% increase in group revenue to $19.5 billion, alongside a 2.3% rise in underlying EBIT to $507.8 million, despite ongoing market headwinds including inflationary pressures and regulatory changes affecting tobacco sales.

The reported profit after tax rose 10.1% to $283.3 million, supported by disciplined cost management and operational efficiencies. Operating cash flow showed outstanding growth, reinforcing Metcash's balance sheet flexibility with a net debt position of $577 million and a conservative debt leverage ratio of 0.96 times.

Growth Across Pillars and Strategic Acquisitions

Metcash's Food, Liquor, and Hardware pillars each contributed to the positive performance. The Food segment expanded through the integration of Superior Foods, acquired in June 2024, which has been successfully embedded and is on track to accelerate growth. Supermarkets maintained market share with resilient sales excluding tobacco, while the Campbells & Convenience business unit showed strong growth driven by new customer wins and expanded product ranges.

In Liquor, Metcash continued to gain market share, particularly through its independent retail network led by the Independent Brewers Association (IBA). The company secured a new $100 million wholesale distribution agreement with Lion in South Australia and saw on-premise sales return to growth in the second half of the year.

The Hardware division, including the Independent Hardware Group (IHG) and Total Tools, showed signs of recovery in the second half of FY25. While trade activity remained subdued, improvements in retail margins and network expansion contributed to stabilizing earnings. The formation of the Total Tools and Hardware Group aims to accelerate growth as market conditions improve.

Strategic Initiatives and Digital Transformation

Metcash is advancing several strategic initiatives to drive future growth and value creation. The ongoing Program Horizon ERP transformation is progressing steadily, targeting completion by late 2026, with a focus on reducing technology complexity and embedding AI capabilities through a partnership with Microsoft. Early AI applications are already delivering benefits in debtor management and employee experience.

The company is also expanding its digital marketplace, Sorted, which now serves around 2,000 supermarket retailers and has seen a 180% increase in retailer engagement. Retail media, under the LocalEyes brand, grew revenue by approximately 30% year-on-year, with plans to contribute around $30 million EBIT by FY29.

Positive Start to FY26 and Outlook

Metcash has commenced FY26 with encouraging sales growth across all pillars, excluding tobacco which continues to decline due to regulatory impacts. The company recently entered a binding agreement to acquire Steve’s Liquor Warehouse, expanding its footprint in Victoria and Tasmania. Hardware sales are supported by growth in timber and building supplies categories and optimism around future demand.

With strong leadership, a diverse portfolio, and a disciplined capital management approach, Metcash is well positioned to capitalize on market opportunities and deliver sustainable shareholder value.