Metcash Ltd (MTS.AX): FY26 Result: Conditions likely to get worse before they get better

Research evidence excerpt

Metcash Ltd (MTS.AX): FY26 Result: Conditions likely to get worse before they get better

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22 Jun 2026 07:28:41 ET │ 16 pages

Metcash Ltd (MTS.AX)

FY26 Result: Conditions likely to get worse before they get better

CITI'S TAKE

Today’s result highlighted multiple earnings headwinds. These included a

$10 million impact related to tobacco excise, sequentially lower EBIT margin

guided in Liquor, higher corporate costs, double digit growth in D&A, and

materially higher net interest expense. Moreover, we are concerned that

falling house prices and rising building materials cost inflation could further

dampen construction activity. Independent supermarkets are facing Price Performance

negative jaws, implying a risk that Metcash may need to provide further (RIC: MTS.AX, BB: MTS AU)

support. We lower our NPAT forecasts by ~4% over FY27-FY28e. We

maintain our Sell rating with an unchanged $2.80 Target Price.

Supermarkets remain challenged — Independents are experiencing: 1) Negative

top-line growth (FY26 Retail LFL scan ex-tobacco of 0.6% implies negative sales

incl-tobacco), and 2) Rising store wages (4.75% increase in GRIA for FY27). This

suggests Metcash may need to provide financial support to retailers at some point

and/or there will be further store closures. Buying retail stores suggests a need to

protect wholesale sales. At low multiples this may be financially appealing, however

retailing is not Metcash’s core competency in our view, and competition remains

fierce. We forecast flat Food EBIT in FY27e.

Liquor margins set to revert in 1H27 — Significantly, Liquor continued to take share in

a very challenging market. However, Endeavour is expected to fight back, and Coles is

trying to turn around Liquorland Warehouse. Consumption is likely to come under