Over 470 jobs are to go at Australian retail distributor Metcash as the company adapts to the “difficult” trading conditions in the country.
Metcash has spent recent months reviewing all aspects of its business in a challenging Australian grocery market.
The company, which serves over 2,500 independent stores in Australia through its IGA distribution business, said 478 employees would lose their jobs across the group. The closure of 15 Campbells cash and carry branches will lead to the loss of 315 of the posts. The other 163 jobs will go from Metcash’s corporate offices.
CEO Andrew Reitzer said the company wanted to ensure it “remained optimally positioned to meet the ongoing difficult trading conditions”.
Reitzer said: “These difficult conditions result from continued deflation which is pushing prices and margins down, and a value conscious consumer who increasingly purchases on discount.”
He said Metcash’s move to combine its IGA Distribution , Merchandising, Fresh and Campbells units into a food and grocery arm had led to “further opportunities to end the duplication of many processes”.
He added: “We will also combine the different business pillars’ property functions in order to better identify and bring to fruition new site opportunities to achieve maximum leverage across our portfolio of brands and our customers’ retail offers. The centralisation and expansion of marketing will ensure improved execution and greater ‘share of voice’ in the marketplace.”
The company will incur a one-off restructuring charge of A$34-43m (US$35.3-44.6m), which it said will result in improved operating income of A$25-30m in its 2013 financial year and a further A$10-15m in the following 12 months.
Metcash’s review, meanwhile, has also led it to sell its foodservice arm Foodlink to Bidvest . Elsewhere, Metcash will book a A$75-90m impairment charge on its Cornetts and Walters ventures. Both ventures will close an unspecified number of “unprofitable” stores.
Reitzer said Metcash said its customers were “holding market share and remain resilient in a challenging trading environment”. He reiterated the wholesaler’s forecast for a low- to mid-single digit increase in underlying earnings per share, excluding the charges linked to the restructuring, for its financial year.
In the six months to 31 October, Metcash reported a 1.3% increase in underlying EPS to 15.2 cents. However, net profit fell 14.3% to A$94.4m due to charges from its acquisition of local retailer Franklins and restructuring costs. EBITA was up 2.2% at A$203.7m. Reported revenue increased 1.7% to A$6.09bn.