Metcash Limited (ASX:MTS) shares continue to plummet after loss of major customer

Shares in grocery company Metcash Limited (ASX: MTS) are down another notch at the time of writing, dropping 0.7% to $2.89 after falling from a share price of $3.68 on May 28 when the company announced Drakes Supermarkets was likely to shun its South Australian distribution centre.

Metcash announced on May 28 the loss could equate to $270 million – the total sales for Drakes in South Australia in FY18 – after Drakes announced it would not commit to have its South Australian supermarkets supplied by Metcash under its proposed new distribution centre.

FY18 earnings for Metcash’s supermarkets and convenience pillar is expected to be in line with the previous year, but the segment will likely report a 1.2% decline in total sales and 3.6% decline in wholesale sales for the year.

Metcash is a formidable player in the competitive grocery space and have not been underestimated by sector giants Woolworths Group Ltd (ASX: WOW) and Wesfarmers Ltd (ASX: WES), both of which are on the gains today while Metcash flails – with Woolworths up 0.4% to $28.75 and Wesfarmers up 0.66% to $45.87.

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Motley Fool contributor Carin Pickworth has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Wesfarmers Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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