Metcash shares slump on Goldman Sachs downgrade
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The news: Goldman Sachs analysts have downgraded food and beverage wholesaler Metcash citing its lagging digital transformation and intensifying competition.
The numbers: The brokerage downgraded the stocks to ‘sell’ from ‘neutral’ and cut its 12-month price target to $3.1 a share from $3.8.
Metcash shares were trading 4.5% lower at $3.39 in early trading on the ASX.
The context: The analysts said Metcash’s higher exposure to tobacco and the continued rise of online grocery retail by bigger rivals Woolworths, Coles and Amazon was increasingly eroding the IGA chain’s value proposition while elevating its price disadvantage.
The group is also seeing its hardware market share erode both in DIY and trade segments, while an acquisition-focused growth strategy will result in lower returns on invested capital.
Metcash last month posted a 6.1% lift in group sales for the fiscal year to 8 September, partly buoyed by recent acquisitions.
The source: Goldman Sachs research
