The ASX 200 stock is falling on its trading update

Let's see how this retailer is performing in FY 2025.

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Metcash Ltd (ASX: MTS) shares are falling on Friday morning.

At the time of writing, the ASX 200 stock is down 0.5% to $3.55.

Why are Metcash shares falling?

Investors have been selling the company's shares on Friday following the release of a trading update ahead of its annual general meeting.

Commenting on trading conditions in FY 2025, Metcash chair, Peter Birtles, said:

The current economic conditions remain challenging and continue to impact consumer confidence. As a result, we expect the shift in consumer behaviour to more value-conscious choices to remain in FY25. The Company's platform of three diversified businesses is fundamentally strong, and we have the right plans, teams and capabilities in place to deliver future growth as we work through the current economic cycle.

Trading update

According to the release, total sales are up 6.1% year to date from 1 May through to 8 September. This has been driven by growth across the Food, Liquor, and hardware pillars.

Management notes that Food (ex tobacco) sales are up 17.9% in a highly value-conscious environment. This reflects volume growth and moderating inflation, which it believes demonstrates the business' resilience and relevance of the independent network's differentiated offer.

Also boosting Food sales has been the inclusion of the Superior Foods business, which was acquired on 3 June. It has continued to win new customers and perform strongly since joining the Metcash stable.

Another positive is that growth momentum in the Liquor pillar has accelerated with independents again winning market share underpinned by the relevance of their localised offer. This has underpinned a 2.7% increase in total liquor sales year to date. Management notes that the IBA independent network has outperformed in a more challenging environment buoyed by further improvements to network quality and competitiveness.

Today's selling may have been caused by its Hardware update. The ASX 200 stock revealed that the external market for IHG has continued to be very challenging with Trade activity softening even further. In addition, retail stores are facing margin pressure due to the impact of lower volumes on fixed costs. Nevertheless, it feels that IHG remains well positioned to capitalise on an increase in activity levels.

For the Total Tools business, normal competitive market conditions have returned following a period of intense pricing pressure from February to May. And while management is cautiously optimistic on trading over the balance of the financial year, the professional tools market remains competitive and subject to external economic factors. Total hardware sales are up 2.5%.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Metcash. 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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