Metcash’s hardware pain soothed by healthy food sales

by | Jun 28, 2024

The Metcash food division is proving resilient and benefiting from household cutbacks on spending at restaurants and cafes, Metcash Chief Executive Officer Doug Jones says.

As a supplier to 1280 IGA supermarkets, Metcash has reported that grocery shoppers are visiting stores more frequently but buying less each time as they hunt for discounts amid sustained cost-of-living pressures while also eating more from home, an Australian Financial Review has found.

The Metcash food division, which supplies IGA and other independent supermarkets, increased earnings before interest and tax by three per cent to $210 million, according to the report.

The slowing economy has also undermined Metcash’s turnover in the hardware arm (Mitre 10, Home Hardware and Total Tools) which saw a 3.8 per cent drop in profit, according to the report, with UBS analyst Shaun Cousins saying in the report that the group result was marginally above market expectations of $488 million in net profit.

The hardware business was hit by what Mr Jones termed a “rapid decline” in builder confidence and a slowdown in construction activity, with EBIT falling 3.8 per cent to $211 million.

Mr Jones is reluctant to predict when the housing construction market might improve, but signalled that an interest rate cut would certainly improve conditions.

He said in the report that he was “nervous trying to call a bottom. The home builder market is in a state of flux right now.”

The structural shortage of dwellings in Australia was the one long-term positive for home construction, which is suffering from a lack of confidence from aspiring new home buyers and construction groups, was

It was in January this year that Metcash hired former JB Hi-Fi Chief Executive Officer, Richard Murray to run the Total Tools business after moving to full ownership in November, spending $101.5 million to buy the remaining 15 per cent. Total Tools now operates 118 stores.

Mr Jones said in the report that there were fierce competitive pressures in the professional tools segment. In the first seven weeks of Metcash’s 2025 financial year sales at Total Tools were down 1.9 per cent for that period.

Metcash announced two deals in February to bolster the growth of its hardware business: the $82 million purchase of Bianco Construction Supplies, which supplies the trade markets in South Australia and the Northern Territory; and the $64 million acquisition of Alpine Truss, a large supplier of frames and trusses to the building sector.