McColl’s warns on profit following supply chain issues
Convenience retailer McColl’s has warned on profit as it reported flat like-for-like sales in its fourth quarter.
In the 13 weeks to 25 November total revenue edged down 0.5% although the like-for-like performance was an improvement on the third quarter when sales were down 0.9%.
The results meant that full year revenue at McColl’s was up 8.3% while like-for-likes fell by 1.4%.
McColl’s suffered disruption to its supply chain in the 12 month period following the collapse of Palmer & Harvey. This has been remedied by an acceleration of the rollout of Morrisons supplying 1,300 of its stores.
In a statement, McColl’s said: “We are extremely grateful for Morrisons’ support during this period, and whilst the transition is now complete, we are continuing to experience a number of challenges. We are working together to address these issues and to develop an optimal range and promotional offer for the future.”
In addition, the company said a stronger performance in tobacco relative to other categories had resulted in a lower than expected conversion of sales to profit. As a result, McColl’s now expects adjusted EBITDA for the full year to be around £35 million with a “modest improvement” the following year.
Jonathan Miller, McColl’s chief executive, said: “2018 has been a very difficult year for the business, marked by unprecedented supply chain disruption and ongoing challenges.”
During the year McColl’s completed 59 convenience store refreshes and acquired 11 new stores. Meanwhile, 66 underperforming newsagents and smaller convenience stores were removed in the period.
Looking ahead, Miller added: “We expect competition in the grocery retail sector to remain intense and we face into significant cost pressures. Important to our future success will be continuing to develop our partnership with Morrisons, alongside our plans to enhance our neighbourhood convenience offer by improving the quality of our estate and our overall customer experience.”
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