Metcash rationalises cash-and-carry business

Posted by Nicole Eckersley on 23rd March 2010

Australian retailer Metcash plans to rationalise its struggling cash-and-carry business.

Metcash insisted that three of the four divisions that make up its Campbells Wholesale business – Campbells Wholesale, CStore Distribution and Foodlink – remain “strong”.

However, the company indicated that it has witnessed a decline at its Campbells Cash & Carry (CCC) unit.

The company insisted that the problems at CCC stem from a general decline of the traditional cash-and-carry wholesale market.

According to Metcash, unbranded convenience stores are no longer are able to compete with modern organised formats like 7 Eleven and the consumer’s desire for value has caused a change in shopping behaviour. As a consequence, traditional customer numbers have fallen.

The company said that reduced turnover and fixed network costs have made the number of CCC warehouses it operates not “viable”.

Metcash said that it will therefore close eight of the division’s 20 warehouses.

CCC will also be merged with its Campbells Wholesale division.

The cost of the restructure is estimated to be A$10.8m (US$9.8m) after tax, with EBIT benefits of approximately A$4-5m.

Metcash maintain its normalised EPS guidance of 7-10% growth as charges will be treated as non-recurring items in the group’s income statement for the year ended 30 April.

“Although this is a painful action to have to take, especially having regard for the excellent staff we will be losing, it is a necessary action to ensure the ongoing health and vitality of the overall Campbells Wholesale business,” Andrew Reitzer, Metcash CEO, said.

The company did not reveal how many jobs would be lost.

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