Metcash's (ASX:MTS) fiscal first-half underlying earnings of AU$0.115 per share and sales revenue of AU$8.48 billion were disappointing, with underlying earnings before interest, taxes of AU$240.2 million missing expectations, according to a Sunday note by Jefferies.

The result is due to lower-than-expected margins in liquor and hardware, Jefferies said.

However, the company's cash flows from operating activities of AU$262.3 million were higher than expected due to a focus on cost and working capital management, Jefferies added.

Jefferies kept a buy rating on Metcash with a price target of AU$4.50.