McColls’ interims reveal a first-half like-for-like sales decline of 2.7%

Published on 23-07-2018 08:24:46
Author Paul Hickman

Today McColl’s, a leader in the sector, reports first-half like-for-like sales decline of 2.7% and a 40bps gross margin hit leading to adjusted pre-tax profit – stripping out property disposals – down 40% at £3.4m.

The convenience store sector is a vibrant and valued part of the British social infrastructure and should arguably prove relatively resilient in a challenged High Street. However nervous investors will always be conscious of the speed at which events unwound at Conviviality Retail. They will want to be clear about underlying trends and the effect on trading profits.

This was an exceptionally difficult period to negotiate, with extreme weather at the beginning of the period, the failure of two suppliers, Palmer & Harvey and Fresh to Store, and well-publicised consumer demand weakness. This on top of the company’s own dynamic position as it worked to transition around 1,300 stores to Morrison’s supply, and relaunched the Safeway brand, following the major acquisition of 298 stores from Co-Op two years ago. Management continues to work towards its strategic goal of making grocery its largest sales category, with an increase from 29% to 33%.

Management’s description of the period as one of the most challenging the company has ever faced does not seem wide of the mark. Profit expectations are being downgraded to flat adjusted EBITDA – of £44m, rather than the market consensus of £50.6m to November 2018, equivalent to a pre-tax downgrade of some 24% against consensus of £27.8m.

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