Metcash has said that it has downgraded its earnings guidance and said that it is planning a $480 million overhaul of its business.

Metcash sells groceries through the IGA network of stores and has said that it is now planning to upgrade its store network and also improve its supply chain in order boost its revenues. The company said that it has downgraded company's 2014 earnings forecast due to disappointing sales in January and February.

Metcash plans to spend up to $480 million in order to revive its business in the coming years and compete better with rivals. The retailer is planning to compete with retail giants Coles and Woolworths with a better network to distribute products in the country. It is looking to open new stores and improve its supply chain to reduce costs.

Chief executive Ian Morrice said, "The consolidation and sustainable network growth initiative will see Metcash focus on converting more independent retailers to our liquor, hardware and automotive banners."

The shares of the company fell after the announcement and were trading 34 cents, or almost 11 per cent, to $2.81.