After the close of trade on Thursday evening, grocery wholesaler and owner of the IGA-banner Metcash Limited (ASX: MTS) released a profit guidance update for the full year that signalled a 13% to 15% decline in earnings per share.
The news hasn’t been well received by investors with the stock opening sharply lower today, sinking as much as 12% in early trade before steadying around the $2.85 mark, for a loss of 9.5%.
Following last night’s update has been the release today of Metcash’s Transformation Plan and Strategy Briefing which is a detailed account of how the company, led by Mr Ian Morrice, plans to turn things around. The turnaround strategy is set to cost up to $700 million and will be partially funded through a reduction in dividends.
Its certainly been a tough ride for investors in Metcash with the stock down 30% in the past year as the company has struggled to maintain market share in the face of sustained price deflation and market expansion by supermarket giants Woolworths Limited (ASX: WOW), and Coles owner Wesfarmers Ltd (ASX: WES).
Despite these pressures it’s possible all the bad news and more is now factored into the company’s share price – which is now trading at levels last seen 10 years ago – making Metcash a potentially enticing contrarian opportunity for deep value investors.