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McColl's-Morrisons supply deal to be completed ahead of schedule

Convenience chain McColl’s will complete its plan to have UK grocer Morrisons supplying 1,300 stores by early next month.

In a half-year results statement on Monday, the retailer said the planned supply chain arrangement will be finalised ahead of schedule following a period of “unprecedented supply chain disruption” at the company, which has hit profit and resulted in a major change of strategy early in the financial year.

CEO Jonathan Miller said it had been “one of the most challenging six months the business has ever faced” following the collapse into administration of wholesale partner Palmer & Harvey (P&H) last November.

“This temporary upheaval has inevitably impacted sales and margin performance in the circa 700 stores that were formerly supplied by P&H, and has also had knock-on effects on the rest of the estate,” he explained.

McColl’s implemented an interim distribution solution following the administration, and completed the transition of over 1,000 stores to Morrisons supply, ahead of schedule. But there was also further disruption in March when Fresh to Store, which was part of McColl's interim supply chain solution, entered into administration.

This required the retailer to set up an additional hub and spoke operation to supply chilled food to a large number of stores.

There was positive news regarding the Safeway brand relaunch, though. At the turn of the year, the brand was relaunched at McColl's, with around 400 fresh, chilled and ambient lines, and it has reportedly driven an increase in 'own brand' participation – up around five percentage points year-on-year in Morrisons supplied stores.

Miller promised the retailer will have “a progressively stronger and simpler operational position with a more compelling offer as we move through the second half and into 2019”.

"We will also continue to improve the quality of our estate, through more store refreshes and acquisitions, and to invest in our customer proposition in what remains a competitive environment,” he noted.

“As the convenience sector continues to grow, we remain confident that our clear strategy will allow us to make further progress and deliver sustainable returns for shareholders."

Total revenue for the 26 weeks to 27 May was up by 19.2% to £601.7 million, but adjusted EBITDA was down to £16 million. Profit before tax of £2.3 million was down from £4.5 million one year before.

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