Grocery giant takes a $237 million hit after losing a deal with 7-Eleven

CHICAGO, IL - JANUARY 10: A sign hangs outside of a 7-Eleven store on January 10, 2018 in Chicago, Illinois. Immigration officials raided nearly 100 7-Eleven stores across the country this morning checking the immigration status of store employees. (Photo by Scott Olson/Getty Images)

One of Australia’s biggest wholesalers is counting the costs of losing a major deal with 7-Eleven.

Metcash on Tuesday reported a writedown of 237.4 million Australian dollars ($162.5 million), just weeks after it disclosed the end of its supplier agreement with the convenience store chain.

In addition, the split will likely lead to a loss in operating profit of roughly 15 million Australian dollars ($10.3 million) this year, after accounting for cost savings, the company said.

Metcash shares dropped 1.4% Tuesday afternoon in Sydney.

About 800 million Australian dollars ($547.6 million) of Metcash’s annual sales come from 7-Eleven, mainly through the supply of tobacco products.

The Australian company announced last month that it had failed to reach an agreement with 7-Eleven over supply requirements for its outlets on the east coast of Australia, including factors such as “delivery routes and scheduling.”

Metcash ultimately decided that these requirements would be “uneconomic” for its convenience store business, it said in a stock exchange filing at the time.

The distributor was still in talks, however, to continue a partnership with 7-Eleven in other parts of the country, it added. It also said it would explore ways to “help offset” the expected hit to its business.

Metcash’s current contract with 7-Eleven is set to end in August 2020.

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