Metcash (ASX: MTS) – Metcash Releases Fourth Trading Update

Metcash Limited has guided to underlying profit after tax of $268 million to $270 million for the financial year ending 30 April 2026, a result that underscores the resilience of its diversified portfolio despite navigating a decidedly challenging retail environment. The trading update, released ahead of full results scheduled for 22 June, paints a picture of a business executing disciplined operations while managing structural headwinds across its divisions and maintaining leverage at the low end of target levels.

The result reflects solid underlying performance across core segments. Food revenues expanded 3.8 percent excluding tobacco, with supermarkets remaining competitive through promotional activity and foodservice operations delivering strong growth driven by customer expansion and contract wins. Liquor performed particularly well, with Metcash-supplied independents continuing to gain market share and EBIT margins recovering to long-term levels in the second half, a meaningful reversal from prior period pressure. Hardware and Tools, the group’s softest performer, maintained market share in a weak trade market while showing improved sales momentum in the second half through pricing and ranging initiatives, though margin pressure persisted, particularly in Victoria and Tasmania.

The headline growth rate of 0.7 percent disguises the underlying health of the business once tobacco’s negative contribution is stripped out. Tobacco trends improved following mitigation initiatives and heightened regulatory enforcement, yet the category’s lower mix actually supported margin improvement across the group. This narrative of portfolio quality improving even as headline growth appears muted is important context for investors assessing the business’s future trajectory and earnings sustainability.

Cash generation remains a genuine strength. Metcash expects cash realisation to exceed its 80 to 90 percent three-year target range, while debt leverage sits at the low end of the group’s target range. Capital expenditure has been actively managed downward, and management has signalled additional cost initiatives underway that should deliver at least $25 million in annualised savings in the coming financial year. This combination of strong cash conversion and disciplined capital allocation provides financial flexibility to invest in growth while maintaining shareholder returns.

What matters for investors is that Metcash has stabilised earnings through a period of retail softness and structural change in its end markets. The underlying NPAT guidance suggests the group will exit the financial year in reasonable shape, supported by portfolio resilience rather than cyclical strength. The recovery in liquor margins and emerging sales momentum in hardware offer modest positive signals, though trade market conditions remain soft. Key items to watch include the specific breakdown of the $25 million cost savings being targeted, any changes to dividend policy given the strong cash position, and forward commentary on the residential building market recovery that hardware operations are positioned for. This announcement is price sensitive and has been flagged as material by the ASX.

View the full ASX announcement (PDF)

About Metcash Limited (ASX: MTS)

Metcash Limited is a wholesale distribution and marketing company based in Macquarie Park, Australia, specializing in grocery, liquor, and hardware products. The company supplies independent supermarkets, convenience stores, hospitality venues, and retailers under brands including IGA, Foodland, Mitre 10, Total Tools, and Cellarbrations. It operates in Australia and New Zealand with approximately 11,500 employees.

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