The Metcash Limited (ASX: MTS) share price has just hit a new 52-week high of $2.59, suggesting shorters have got it wrong.
Metcash has been one of the most shorted stocks on the ASX over the past few weeks, with some investors betting the share price is heading down – not to rise and hit 52-week highs. Those investors are no doubt anticipating that ongoing competition with market leader in supermarkets Woolworths Limited (ASX: WOW) and Wesfarmers Ltd (ASX: WES) – which owns Coles, will crunch Metcash's revenues, margins and profits. And not forgetting discounter Aldi and the imminent arrival of Amazon into Australia and potentially into the supermarket sector.
Metcash is primarily a wholesale distributor to independent supermarket retailers including the IGA network. The company also owns the Mitre 10 brand and franchise with around 400 stores across Australia.
The company has shown that it can compete with Woolies and Coles, after reporting 2017 full year (FY2017) results in June 2017. Metcash saw group earnings before interest and tax (EBIT) rise 7.7% to $297 million as sales rose 5.4% to a whopping $14 billion.
It seems there is room in the supermarket sector for Metcash to remain profitable, which could see the share price rise higher over the next few years.
