Metcash shares eased yesterday to an eight month low yesterday after the company cut its 2011 full year profit forecast in half.
Metcash said underlying earnings growth is now expected to be in the range of 3% to 5% – down from the previously forecast 6%-8%.
The group joined its bigger rival Woolworths in cutting its earnings guidance for the full year.
Woolies new guidance is for earnings growth of 5% to 8%, instead as much as 11% for the year.
Like Woolies, Metcash blamed a string of factors, including the bad weather, price deflation and consumer caution.
The company had warned of the possible downgrade when it reported its half-year results last November and food and liquor prices had continued to see deflation since that time, Metcash said yesterday.
Delivering the first-half results on November 30, 2010, Metcash chief executive Andrew Reitzer said deflation on dry packaged groceries at the time was 1.7%, and that deflation on its fresh product was about 11%.(That will change with the impact of the
The shares also reacted to some of the comments Metcash CEO, Andrew Reitzer said in a conference call later with analysts.
In that he blamed price deflation (no great surprise), and then claimed that Coles supermarkets boss, Ian Mcleod was responsible for a lot of the problems with his intense price cutting.
He was reported by various media outlets as saying that rival Coles was responsible for driving prices down and threatening to destroy the local food-processing industry.
The retailer, which is challenging the Australian Competition and Consumer Commission’s rejection of its planned acquisition of Franklins, said its market share in the grocery market was stable at 19.6 per cent.
That case is in the Federal Court in the next week.
Metcash cited the usual litany of woes, including poor weather, the floods and cautious consumers.
- Continuing food and liquor price deflation;
- Value driven consumer behaviour;
- Escalating utility costs;
- Unseasonal weather; and
- High interest rates.
"In addition, the natural disasters in Queensland and Victoria have impacted operations, albeit the full financial impact is yet to be determined," Metcash said.
The shares dipped 6c to $3.96.
That’s the lowest they have been since last June.
They recovered to close down 2c at $4.00.
