Metcash has announced a $237.4 million impairment to goodwill and other assets in its food business. It comes after 7-Eleven would not renew its east coast supply contract, which expires in August 2020.
The company made the announcement as it prepares to report its 1H20 results tomorrow (5 December).
Metcash said it was unable to reach an agreement with the company on supply requirements for the east coast but was still in discussion with 7-Eleven on Western Australia supply and smaller categories on the east coast.
Total annual sales to 7-Eleven are roughly $800 million, made up mainly of lower-margin tobacco. Metcash said losing the 7-Eleven contract would cost the company $15 million in annual earnings.
Metcash CEO Jeff Adams told The Australian Financial Review: "One thing to keep in mind, this is very different to a full supermarket contract. It's a very low margin. We don't do anything but move boxes for these guys."
That announcement followed the end of its $270 million annual supply agreement with South Australian independent, Drakes Supermarkets. That would cost the company $17 million, it said (Food & Drink Business, 27 September 2019).
Metcash had been supplying 7-Eleven since 2005.
