McColl’s shares slide 30% after fresh profit warning
Shares in McColl’s have lost almost a third of their market value after it issued a fresh profit warning on continuing supply chain disruption and tough trading environment.
The business, which has more than 1,500 managed convenience stores and operates almost 600 Post Offices, lowered expectations for earnings in the year to 25 November for the second time in 2018 when it updated investors on its progress.
It said on Monday it was now forecasting adjusted profits of £35m compared to the £44m predicted in July.
McColl’s said like for like sales and revenues were flat in its fourth quarter – with comparable sales over the 12 months 1.4% down.
It said business in its neighbourhood stores, which include newsagents, remained difficult as shoppers continue to watch what they spend amid uncertainty over the UK’s looming exit from the EU.
McColl’s was hit hard by the collapse of wholesaler Palmer & Harvey (P&H) a year ago – forcing the chain to rush into a new contract with Morrisons to provide Safeway-branded goods.
Its statement said: “The speed of this transition has created significant challenges and severely disrupted our plans
for the launch of Safeway.
“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, a stronger performance in tobacco, relative to other categories, has resulted in a lower conversion of sales to profit than anticipated.
“As a result, we now expect adjusted EBITDA for FY18 to be around £35m.”
McColl’s shares are almost 70% lower in the year to date.
Patrick O’Brien, research director at analytics firm GlobalData, said of the performance: “Three months ago, McColl’s was proudly trumpeting that the accelerated rollout of Morrisons’ supply to its 1,300 stores had been completed, including the 700 stores formerly serviced by P&H.
“At the time, it said that the disruption it had faced was over, enabling it to ‘refocus on day-to-day operations’.
“Now it says that it is experiencing a number of challenges related to the transition, though it did not explain what they were, and pointed to difficult trading conditions.
“The profit warning is very damaging to McColl’s reputation.”
Chief executive Jonathan Miller said in the statement: “Looking ahead, 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.”