Sales up as shoppers stay local, says Metcash
Metcash has confirmed the shift to local and neighbourhood shopping that emerged in 2020 as the COVID-19 pandemic spread has continued into the new year across all its key pillars of grocery, liquor and hardware with the wholesaler reporting strong sales momentum for the first four months of 2021.
It comes as Metcash pledged to up its total spend on its store refurbishments, restructure and investment in its systems, saying it will spend $375m between fiscal 2022 and 2024.
The bulk of that new investment under the MFuture growth program will be directed at hardware, around $225m, $70m directed to grocery, $10m in liquor and $70m across the group in areas such as online.
In a trading update and investor day on Tuesday, Metcash also said it was pushing ahead with its MFuture restructure plan, that takes in store refurbishments and cost efficiencies, and was on track to deliver around $50m in cost reductions over 2020 and 2021, excluding the in-store costs related to COVID-19.
Metcash has in addition detailed a capital expenditure program under its Project Horizon plan that will target capital expenditure investment of $70m-$80m over the next two years with around $20m in capex slated for fiscal 2021 and the balance between 2022 and 2023, weighted to fiscal 2022.
The ramped up capex in its stores and refurbishment plans is integral to Metcash's broader strategy to take advantage of the pivot of shoppers to buying at local or neighbourhood stores, such as its IGA and Foodland supermarkets or Cellarbrations bottle shops, that emerged as a key theme in 2020.
In a trading update Metcash chief executive Jeff Adams underlined the importance of that shift by consumers and that it had continued into the first four months of the second half of fiscal 2021.
He said strong sales momentum had continued in all pillars (grocery, liquor and hardware) from a shift in consumer behaviour, improved competitiveness of its retailers, additional investment in shopper retention, and a favourable Christmas/New Year period.
This shift has benefited independent supermarket chains that wholesaler Metcash supplies to, as well as smaller local liquor stores and hardware outlets.
Metcash advised that March and April 2021 will include cycling the spike in sales volumes in the food and hardware pillars in 2020, associated with the onset of COVID-19 related restrictions and panic shopping.
In the first four months of the year Metcash supermarkets sales increased 14.4 per cent while total food sales increased 4.1 per cent versus the pervious corresponding period (up 14.1 per cent excluding the impact of losing the 7-Eleven contract).
Hardware sales increased 31.6 per cent for the first four months of 2021 with increased investment in customer retention, helping drive continued strong demand in DIY, and trade tracking positively.
Liquor sales have increased 19.6 per cent with continued strong sales in the retail network more than offsetting the adverse impact of COVID-19 restrictions on 'on-premise' customers. Sales to the IBA retail banner group increased 23.7 per cent and IBA retail scan sales for the same period were up 20.6 per cent.
In terms of its MFuture strategy, Metcash said significant progress had been made with strong foundations for the next three years with the wholesaler and MFuture continuing to support its retailers to further improve their competitiveness and retain new and returned customers gained through COVID, as well as attract new shoppers.
The MFuture strategy, involving supply chain, new store formats, better branding and investment in systems, is targeting an investment of $165m over five years.
For its core grocery pillar, which contributes the largest proportion of earnings for Metcash, the company told investors on Tuesday that there were good growth opportunities driven by accelerating and leveraging current initiatives such as the roll out of new Diamond store refurbishments, better range and price, new store formats and private and exclusive labels.
At its hardware pillar, comprising a national network of 644 stores and banners such as Mitre 10 and Home Timber Hardware, the COVID-19 pandemic had led to a change on the sales mix with a move towards DIY versus trade. In 2018 DIY contributed 35 per cent of business and trade (professionals) was 65 per cent. Today that mix was 40 per cent for DIY and 60 per cent to tradies.
Originally published as Sales up as shoppers stay local says Metcash