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McColl's CEO talks of "very difficult year" and warns on profit

Convenience retail chain McColl’s has issued a profit warning this morning (3 December), 24 hours before it was scheduled to announce full-year trading results.

It said that in light of transitional challenges related to the switch of wholesale supply from the collapsed Palmer and Harvey (P&H) to Morrisons, and continued difficult trading conditions, adjusted EBITDA for the financial year is expected to be circa £35 million. The figure is around £6 million down on analysts’ predictions, and £9 million below previous company estimates.

Supply chain issues have been the story of the year for McColl’s, which was forced to implement an interim distribution solution following P&H’s administration in November 2017. By the time of its half-year results announcement, the chain had completed the transition of over 1,000 stores to Morrisons supply, despite further disruption in March when part of McColl’ interim solution, Fresh to Store, also entered into administration.

Total like-for-like (LFL) sales for the fourth quarter were flat, which the company said was an improvement on Q3 supported by a strong performance in tobacco, but full-year LFLs were down by 1.4%. These trading periods covered the 13 weeks and 52 weeks to 25 November 2018, respectively.

Giving an indication of the significant change under way at the organisation, McColl’s said that over the course of the year 59 convenience store refreshes were completed, 11 new convenience stores were acquired, and it removed 66 under-performing newsagents and smaller convenience stores.

"2018 has been a very difficult year for the business, marked by unprecedented supply chain disruption and ongoing challenges,” explained McColl’s CEO Jonathan Miller.

“I am, however, extremely grateful for the continued hard work of all my colleagues and the ongoing support of Morrisons. Looking ahead, we expect competition in the grocery retail sector to remain intense and we face into significant cost pressures.”

He added: “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."

McColl’s said it has now completed the switch of supply to Morrisons in 1,300 of its stores, ahead of schedule. However, the speed of this transition has caused the organisation challenges, and has “severely disrupted” its plans for the launch of Safeway brand.