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McColl’s prioritises shelf availability

McColl’s is focusing on operation standards and shelf availability now its supply chain woes seem to be in the past. The retailer described how its ops team has been able to refocus on retail execution in store, as well as improve shelf availability, although it states it still has some way to go in chilled and fresh products.

The strategy notes come as the retailer reveals its interim results for the 26 week period which ended 26 May 2019. Total revenue was up 0.1% to £611.1 million, and like-for-likes also increased 1%. Profit before tax was down from £2.3 million last year to £0.2 million, while adjusted EBITDA also dropped from £16 million to £13 million. McColl’s expects to be “broadly in line” with full-year expectations.

CEO, Jonathan Miller, said: “The key priorities that we outlined for this year were to stabilise the business and to refocus on retail execution following a challenging 2018. We have made good progress on both of these fronts whilst also maintaining strong capital discipline, reducing debt whilst sustaining appropriate levels of investment.

"I am encouraged by the performance we have delivered as we regain greater operational stability, but we still have more work to do in the second half of the year. The market remains highly competitive, with challenging trading conditions, given the unseasonable weather and uncertain economic climate.”

Last year was a difficult year for the convenience retail chain as it issued a profit warning in December, hours before it released its full-year results. It blamed transitional challenges related to the switch of wholesale supply from the collapsed Palmer and Harvey (P&H) to Morrisons, and continued difficult trading conditions.

McColl’s 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.

Thomas Brereton, retail analyst at GlobalData, said: "McColl’s is on the right path to recovery, but the reality is that it is moving along that path too slowly."

He added: "Although the prominent fall in pre-tax profit will make the headlines today, McColl’s is right to forge ahead with its estate investment (Project Refresh), with its tired stores – particularly its newsagents – no longer able to rely on its convenient locations to pull in shoppers; heavy investment from the likes of Tesco and Sainsbury’s have given regular convenience consumers higher expectations of store standards and proposition. But this must be balanced with maintaining a respectable profit level and keeping shareholders happy, and McColl’s are currently struggling to do both."

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