Key Highlights

  • Group sales rose 3.5% in the first 18 weeks of FY27, or 2.8% excluding tobacco.
  • First-half Earnings are expected to be affected by an adverse sales mix in Superior Food, a tobacco excise change and cost inflation.
  • FY26 sales Revenue was $17,354.0 million, up 0.2%, and underlying EBIT was $503.7 million, down 0.8%.
  • Metcash targets $25 million of annualised cost savings in FY27, and Leverage was 1.0 times at the end of FY26.

What does Metcash's early FY27 trading say about the independent retail networks it supplies? At its Annual General Meeting on 9 September 2026, Metcash Limited (ASX:MTS) reported group sales up 3.5% for the first 18 weeks of FY27, or 2.8% excluding tobacco. It also said first-half earnings would be affected by an adverse sales mix in Superior Food, a change to tobacco excise and persistent cost inflation, and that trading conditions were expected to remain challenging.

The 9 September trading update

By pillar, Food sales rose 2.6% excluding tobacco (3.8% including it). Liquor rose 0.8%, with wholesale sales to on-premise customers up 5.1% and sales to independent retail and contract customers flat. Hardware and Tools rose 6.0%, with Total Tools up 9.8% and Hardware up 5.0%.

Tobacco sales rose 11.7%, which the company linked to enforcement of regulation in Queensland, New South Wales and Western Australia. The chair described Metcash as entering FY27 in "a position of strength" while noting conditions would stay challenging. No numeric earnings guidance was given.

The company flagged the removal of an accelerated tobacco excise increase, with a net impact of about $10 million in FY27 weighted to the first half (all figures Australian dollars). It also said the New Zealand wholesale liquor Business will be wound down and exited in the early second half, with an earnings impact of about $2 million excluding redundancies.

How Metcash makes money

Metcash is a wholesaler and distributor rather than a conventional retailer. Its Food pillar supplies independent supermarkets under the IGA banner and, through Foodservice and Convenience, supplies convenience, petrol and foodservice customers. Liquor supplies independent bottle shops and venues under brands including Cellarbrations and IBA. Hardware and Tools supplies independent hardware stores and operates the Total Tools network.

Management says the group supports about 105,000 customers and 6,300 bannered stores and reaches 95% of Australians. Earnings depend on wholesale volumes and margins, the health of its independent retailers, and the costs of running a national Supply chain.

FY26 results: a steady year

For the year to 30 April 2026, reported on 22 June 2026, sales revenue was $17,354.0 million, up 0.2%. Underlying EBIT was $503.7 million, down 0.8% from $507.8 million, though the company says it rose 1.6% after normalising for strategy and integration costs. Underlying Profit after tax was $268.8 million, down 2.4%, and underlying Earnings Per Share were 24.5 cents.

Operating cash flow rose 3.5% to $558 million. Net Debt was $616.6 million (FY25: $577.4 million), reflecting acquisitions and capital investment. The full-year Dividend was 18.0 cents fully franked, unchanged from FY25, comprising a 9.5 cent final dividend. The Dividend reinvestment plan was suspended for that payment.

By pillar, underlying EBIT was as follows.

Food: $261.8 million, up 5.4% from $248.4 million. Liquor: $100.1 million, down from $104.1 million. Hardware: $177.3 million, down from $189.3 million.

Food benefited from ex-tobacco sales growth of 5.4%, and the IGA large-store price gap to the major chains narrowed to 2.1%. Liquor held a 32.3% market share, with improvement in the second half. Hardware was held back by subdued trade Demand in Victoria and Tasmania, partly offset by Total Tools earnings growth of 3.7%.

Costs, savings and strategic projects

Cost control is central to the FY27 story. Metcash targets $25 million of annualised cost savings in FY27 through procurement, logistics and overhead efficiencies, and says its cost-out programs are on track.

Its Horizon technology consolidation program is continuing. The September update said Release 2 is planned for the first quarter of calendar 2027, with FY27 project costs estimated at $18 million to $20 million before tax. The FY26 accounts show cumulative Horizon costs of $286.7 million.

Interpretation (own reading): the mix of tobacco, Superior Food and cost Inflation points to a first half that management expects to be lower than the sales growth alone would suggest, with the company aiming to ease cost pressure in the second half. That is an inference from the wording, not a forecast the company has published.

Balance sheet and contingent items

Leverage was 1.0 times at the end of FY26, at the bottom of the target range. The FY26 accounts also describe a contingent Liability linked to the Ritchies put option, with Metcash estimating that the consideration based on Ritchies' 2025 financial year would have been $240 million to $250 million.

Acquisitions in the year included Steve's Liquor Warehouse stores and a 75% stake in Holliman's Rural. Metcash also exercised put options on several joint-venture hardware stores for $8.9 million.

Risks and what to monitor

Watch the half-year result, where the company has already pointed to the main headwinds. The date was not verified for this article.

Other items include whether cost inflation continues to outpace sales in Food and Liquor, whether the second-half cost measures deliver, and the pace of Total Tools and Hardware sales given the sector uncertainty. Tobacco is also worth tracking, given the gap between total and ex-tobacco growth rates.