Metcash holds FY26 earnings steady as Food and Liquor offset a soft hardware market

About Metcash

Metcash Limited (ASX: MTS) is a leading Australian wholesale distribution and marketing company that supplies independent retailers across three pillars: Food, Liquor, and Hardware & Tools. Through the IGA, Foodland and Campbells networks it is the largest supplier to independent supermarkets and convenience stores, while its Australian Liquor Marketers business supplies banners including Cellarbrations, The Bottle-O and IGA Liquor. Its Total Tools Holding Group brings together Mitre 10, Home Hardware and Total Tools. The group serves roughly 105,000 customers and around 5,500 suppliers from 63 distribution centres, reaching an estimated 95% of Australians. Metcash operates on a financial year ending in late April and positions itself as the indispensable link between suppliers and independent businesses under the banner “Winning with Independents”.

Group performance

The result reflected what the company described as solid trading through the resilience of Food and Liquor, a diversified portfolio and disciplined execution. Group EBIT eased 0.8% to $503.7 million on a reported basis, but rose 1.6% to $516.1 million before one-off strategy and integration costs of $12.4 million. Underlying earnings per share were 24.5 cents, down from 25.1 cents, and return on funds employed was around 20%, reflecting returns through the investment cycle following heavier prior-year acquisition activity.

A defining feature of the year was the diversification of revenue streams. Foodservice & Convenience grew strongly, while the wholesale base, which still generates around three-quarters of group earnings, remained dependable. Charge-through sales, direct sales from suppliers to retailers invoiced through Metcash rose 5.0% to $2,274.4 million, lifting reported statutory revenue modestly to $17,354.0 million.

Food

Food remained the largest pillar, with total revenue including charge-through of $10,543.0 million, down 0.6% as the structural decline in tobacco continued. Excluding tobacco, Food revenue rose 5.4%, with supermarkets up 2.6% and Foodservice & Convenience up 14.0%. Tobacco revenue fell 29.0% to $1,308.7 million, although the pace of decline slowed in the second half where state enforcement of illicit-tobacco laws strengthened, particularly in Queensland.

Food earnings were resilient, with EBIT up 5.4% to $261.8 million and the EBIT margin improving to 2.5% as the lower-margin tobacco category reduced its weighting in the sales mix. The merged Foodservice & Convenience business, spanning Campbells & Convenience and Superior Foods, has become a meaningful contributor, and Metcash has begun acquiring selected IGA supermarkets through its Action Supermarkets business, targeting ownership of 25–30% of IGA network revenue over time.

Liquor

Liquor delivered steady results, with total revenue up 1.0% to $5,374.6 million and further market-share gains, lifting Metcash’s Australian Liquor Marketers share of the packaged liquor market to 32.3% on a rolling basis. On-premise sales grew 6.4%, supporting the group’s multi-channel strategy. Liquor EBIT eased 3.8% to $100.1 million, partly reflecting higher depreciation and amortisation, with margins returning toward long-run averages in the second half. The pillar renewed contracts worth more than $500 million during the year and continued to win where growth is concentrated, outperforming in 35 of 53 packaged-liquor subcategories.

Hardware & Tools

Hardware & Tools faced the most challenging backdrop, with a soft trade market weighing on demand, particularly in Victoria and Tasmania. Total revenue including charge-through rose 4.3% to $3,710.8 million, but EBIT fell 6.3% to $177.3 million as retail margins came under pressure. Encouragingly, sales momentum accelerated in the second half, with like-for-like network sales improving and Tools retail sales up 7.2%. The pillar, anchored by the Total Tools Holding Group following the integration of the former Mitre 10, Home Hardware and Total Tools businesses, has reset its strategy with a plan to return to mid-cycle margins as the building cycle recovers.

Capital and cash

Metcash highlighted a strong cash performance and balance-sheet flexibility. Operating cash flow of $558.0 million underpinned a three-year rolling cash realisation ratio of about 104%, and capital expenditure was held below guidance at $175 million, with FY27 capex expected to reduce to around $150 million excluding mergers and acquisitions. Net debt was $616.6 million and the debt leverage ratio finished at 1.0 times, at the low end of the group’s 1.0–1.75 times target range. Investment spend moderated following the prior year’s larger acquisitions, which had included Superior Foods.

Strategy and technology

The company continued to invest in its platform, including its Program Horizon ERP replacement and a deepening Microsoft partnership intended to make the group “AI-ready”. Its Sorted B2B marketplace processed around $5.9 billion in e-commerce sales, representing roughly 30% of group revenue, while the retail-media business generated about $20 million in its first scaled year.

Conclusion

The FY26 result presents a picture of disciplined, diversified retailing at Metcash, with the dependable wholesale base and resilient Food and Liquor pillars cushioning a difficult period for hardware and the ongoing tobacco decline. With improving second-half momentum in Hardware & Tools, a strengthening platform and a conservative balance sheet, the near-term trajectory will continue to depend on the timing of a trade-market recovery, the pace of tobacco normalisation and broader cost-of-living conditions. Early FY27 trading showed a softer May followed by a clearer improvement in June, leaving the group, in its own words, well placed for growth and attractive returns through the cycle.