Almost 500 Metcash staff will lose their jobs as a result of the company’s strategic review into the company.
Fifteen project groups were established to look at every aspect of its business as a consequence of difficult conditions resulting from continued deflation, which is pushing prices and margins down and conscious consumers are increasingly purchasing on discount.
Metcash CEO, Andrew Reitzer, said each project group has made recommendations on how Metcash can improve and work more effectively.
“The establishment of Metcash Food and Grocery, combining IGA Distribution, Merchandising, Fresh and Campbells, has identified further opportunities to end the duplication of many processes,” he said.
“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.”
As a result people, 478 positions will be made redundant from Campbells, Merchandising, Fresh and its corporate offices.
"We will close 15 regional Campbells Cash & Carry branches. This recognises the changing dynamic in the convenience sector as our mix of business swings more heavily towards the organised petrol and convenience sector and away from the accelerating decline of traditional convenience stores,” Reitzer said.
“This strategy is aimed at further reducing the fixed cost base of Campbells while replacing it with the latest technological single pick distribution solution and a network of optimally situated branches. Further potential exists for establishing strategic franchise arrangements in some areas. As a result 315 positions will become redundant in the Campbells business.”
Metcash will also be selling its specialist food service business Foodlink to Bidvest Australia where terms of the sale agreement remain confidential. The 90 staff currently employed by Foodlink will be offered employment by Bidvest as part of the sale agreement.
Additionally, some unprofitable stores of its Cornetts and Walters joint ventures will be closed.
“The two joint ventures have been hit hard not only by deflation but also by the environmental and economic difficulties specific to the Queensland market. The series of natural disasters experienced over the last 12 months together with the fact that many of the stores are in tourist areas and tourism numbers have fallen dramatically has particularly hurt these businesses,” Reitzer said.
Both companies have taken on many new stores in recent years and the current trading environment has stifled their ability to develop these stores to acceptable levels of profitability.
“By taking this action now and assisting our joint venture partners to restructure their operations we believe these businesses will be in a much stronger position and better able to cope with the market conditions.”
As a result of the announcement, Reitzer reiterated its existing guidance of low to mid single digit growth in underlying EPS.