Metcash (ASX:MTS): Why This Under-the-Radar ASX Stock Could Be One to Watch in September

Sonal Goyal

01 September 2026 10:50 AM AEST

Metcash (ASX:MTS): Why This Under-the-Radar ASX Stock Could Be One to Watch in September

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Metcash Limited (ASX:MTS) is a wholesale distributor and Marketing group underpinning three pillars: food, where it supplies independent supermarkets under the IGA banner; liquor, through brands such as Cellarbrations and IGA Liquor; and hardware, where it owns Mitre 10, Home Timber & Hardware and Total Tools. That Diversification across staples and trade gives it defensive qualities and multiple Earnings streams.

Steady FY26 earnings and strong cash generation have kept Metcash on the radar as an under-appreciated defensive name heading into September.

Latest Development

For FY26, Metcash reported earnings up around 1.9% on improved trading, with the diversification across its pillars helping offset a decline in tobacco sales that has weighed on convenience Revenue across the sector. The company guided its FY26 net profit after tax toward the A$268–270 million range as liquor margins recovered, and it declared a fully Franked Dividend of 18 cents per share, pointing to strong cash generation as its starting point for FY27.

The result reflected resilience in food and hardware alongside a recovery in liquor margins, even in a subdued consumer environment.

What Could Drive the Shares Next?

Catalysts include continued resilience in food, further recovery in liquor margins, a pick-up in hardware Demand as construction and renovation activity improves, and disciplined cost and cash management. Growth in the trade-hardware businesses would be particularly supportive.

Evidence that the diversified model can keep growing earnings through a soft consumer environment would support the shares.

Risks Investors Should Watch

Metcash competes against the major supermarket chains in food and against large retailers in hardware, and independent retailers can lose share to them. The hardware Business is exposed to the construction and renovation cycle, which can soften.

Structural declines such as the fall in tobacco, and cost-of-living pressure on consumers, are additional considerations.

Investor Takeaway

Metcash grew FY26 earnings modestly on improved trading, with liquor margins recovering and strong cash generation supporting an 18-cent dividend, despite a tobacco headwind. Whether it warrants a September watch depends on its diversified pillars continuing to grow through a soft consumer backdrop. Food and hardware trends, liquor margins and cash generation are the things to watch.

FAQs

Q: Why is Metcash (ASX:MTS) considered an under-appreciated defensive stock?

A: Metcash grew FY26 earnings around 1.9% despite a tobacco sales decline, with its three-pillar structure across food, liquor and hardware providing diversification and strong cash generation to support an 18-cent dividend.

Q: What are Metcash's three business pillars?

A: Metcash operates food (supplying independent supermarkets under the IGA banner), liquor (through brands like Cellarbrations), and hardware (owning Mitre 10, Home Timber & Hardware and Total Tools).

Q: What is the key risk for Metcash's hardware business?

A: The hardware business is exposed to the construction and renovation cycle, which can soften, making it a swing factor for group earnings alongside competition from major retailers.

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