Why the Metcash share price is tumbling again today

Metcash Limited (ASX: MTS) shares are lower on potential weakness at its hardware business.

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The Metcash Limited (ASX: MTS) share price is down 5.3% after falling around 10% yesterday on the back of its full year profit report. For the financial year ending April 30 2019 Metcash's adjusted net profit after tax fell 3% to $210.3 million on sales up 1.8% to $12.7 billion. 

The group will pay a final fully franked dividend per share of 7 cents to take full year dividends to 13.5 cents on full year earnings of 22.6 cents per share. The company flagged that the 1.8% rise in earnings per share in part being thanks to a $150 million share buy-back it also completed over the year. 

However, the stock is probably falling on the back of a warning that its hardware sales may come under pressure in FY 2020, with them already being lower for the first 7 weeks of Metcash's new financial year. Metcash has suggested that the weaker economy might lead to a slowdown in DIY and residential construction activity across the property sector in FY 2020. Hardware is often considered the growth driver for Metcash investors to offset any potential weakness in its IGA store supply or liquor businesses. 

The group declined to provide any specific guidance for its supermarkets or liquor operations in FY 2020.

Motley Fool contributor Tom Richardson has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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