Metcash Liquor has delivered significant earnings growth in the company’s financial results for the year ending April 30, 2021. Total liquor sales increased 19.2% to $4.4billion (FY20: $3.7billion), underpinned by strong demand in the retail network, partly offset by lower sales to on-premise customers due to the impact of COVID trading restrictions.
“We are particularly pleased with FY21 results and the way in which the team worked with our customers,” said ALM CEO Chris Baddock (below). “Those in the on-premise who were adversely affected with rolling lockdowns, which continue today, were assisted on each of their individual needs.
“Then, with the increase in volumes across the retail network, our supply chain stood up as we managed the inconsistencies in demand as we rolled through different stages of lockdowns and changes in consumer behaviours.”
Wholesale sales to the IBA retail banner group increased 22.6% with strong growth in Cellarbrations, the Bottle-O, IGA Liquor, Duncans, Thirsty Camel, Liquor@, Big Bargain and Porters. Metcash said the strong sales growth was buoyed by an increase in customer preference for local neighbourhood shopping, home consumption substituting ‘on-premise’ consumption and less overseas travel and duty-free sales.
Retail sales in the IBA retail banner group increased 19.7% (FY20: +3.2%), with strong growth continuing in 2H21 despite a recovery in ‘on-premise’ sales. The off-premise network saw higher average transactions, basket size and spend. The acquisition of the Kollaras private label wine business also boosted the bottom line.
Liquor EBIT increased $15.9m (+21.8%) to $88.7m reflecting the increase in sales volumes and what Metcash described as “the effective management of costs”.
“The EBIT margin for Liquor was in line with the prior corresponding year at 2.0% despite an increase in the weighting of lower-margin categories in the sales mix,” the retailer said.
Overall, Group revenue was up 9.9% to $14.3billion, and including charge-through sales, it exceeded $16billion for the first time, with sales up 10.1% to $16.4billion.
Group CEO, Jeff Adams said: “It has been a standout year for Metcash, with record sales underpinning significant earnings growth and record operating cashflow.
“From an earnings perspective, strong growth was achieved in all Pillars, with Liquor and Hardware standouts delivering EBIT growth of ~22% and ~62% respectively, and contributing to an improvement in the Group’s operating leverage. Our Food pillar also performed well, delivering much higher underlying earnings while continuing to support its retail customers through a challenging environment.”
He said all pillars performed strongly, as the Group successfully navigated significant challenges and uncertainty associated with COVID, while continuing to implement its MFuture growth initiatives.
“The early success of our MFuture initiatives laid the foundations for a very successful year for Metcash and our independent retailers, with their improved competitiveness being a key factor in the retention of new and returning customers gained though COVID,” he noted. “This, together with the continuation of an increased preference for local neighbourhood shopping and the migration from cities to regional areas, has driven strong sales growth across our independent retail networks, significantly improving their overall health.
“I am particularly proud of our teams’ and retailers’ achievements in continuing to drive the implementation of our MFuture initiatives despite the challenges of managing unprecedented levels of demand and ever-changing local health regulations. We have made significant progress with key initiatives such as our store upgrade programs, rolling out new store formats, expansion of private and exclusive label ranges and accelerating our eCommerce plans.”
Sales boom continues in new financial year
Adams said the Group has continued to benefit from a shift in consumer behaviour in the first eight weeks of the new financial year.
In liquor, very strong sales have continued in the first eight weeks of FY22, increasing 26% compared with the same period in FY20, and 17.3% compared with the same period in FY21.
Sales to the IBA retail banner group in the first eight weeks of FY22 increased 23.1% compared with the same period in FY20, and 2.8% compared with the same period in FY21
The company noted: “The significant uplift reflects continued strong demand across retail stores and an improvement in sales to ‘on-premise’ customers. Sales to the IBA retail banner group in the first eight weeks of FY22 increased 23.1% compared with the same period in FY20, and 2.8% compared with the same period in FY21.”
It said the Liquor pillar is focused on progressing its MFuture growth initiatives in private and exclusive label, digital transformation, supply chain flexibility and efficiency, and driving brand awareness and appeal.
The Group is aiming for owned and exclusive brands to be 5% of IBA sales by 2024 (up $100million).